Reluctant Home Sellers Keep Housing Inventory Tight
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What is the main topic discussed in this episode?
Here's your Money Briefing for Friday, January 22nd. I'm J.R. Whalen for The Wall Street Journal.
How is the pandemic driving demand for larger homes?
The coronavirus pandemic has sent many Americans looking for a larger home where they could have more space and work remotely more easily. The hard part is actually finding a home when some current homeowners have stayed put for upwards of 20 years with no plans of putting their homes on the market.
Well, I think there's definitely concerns about the shortage of inventory out there and the difficulty that particularly first-time homebuyers are having getting into the market, finding homes that they can afford to buy.
Coming up, our housing reporter Nicole Friedman will explain why homeowners are keeping their homes off the market and how long tight housing market inventory is expected to last. That's after the break.
Home sales hit a 14-year high toward the end of last year. They might have been even stronger if the current rush of prospective homebuyers had a bigger supply of homes to choose from. So why aren't more homeowners thinking of selling, and what's that doing to the housing market? Our housing reporter Nicole Friedman has been tracking this, and she's here to discuss. Nicole, thanks for being here.
How long are homeowners staying in their homes compared to a decade ago?
Thank you for having me.
So what kinds of numbers are we talking about here, about people staying in their homes longer?
So there has been a trend in the past decade where Americans are living in their homes longer. Homeowners are staying in their homes longer. So the newest data, an analysis by Redfin shows that the typical homeowner in 2020 had lived in their home for 13 years. And that's up from in 2010, it was a little under nine years. So that's a big jump in the past decade in terms of how long people are staying in their homes.
And so what's that mean for the supply of homes for sale?
So the most recent numbers we have are for November.
What does 'months supply' of homes mean and how low is inventory now?
And at the end of November, there were about 1.3 million homes for sale, which was more than 20% lower than a year earlier. And it was actually the lowest level on record. And the way that economists like to track inventory is kind of months supply. So if sales continue at the current pace, How long will it be until supply is totally depleted? And in November, that was 2.3 months supply of homes left in the U.S. And a healthy market is considered about four to six months of supply. So two to three is extremely low.
OK, so there are strong sales despite the short supply because pretty much everything that's being put on the market is selling. So I guess the big question is, why are homeowners staying put and not listing their homes?
So there are a couple of reasons why homeowners are not selling in what is definitely a seller's market. One reason is COVID-19. People don't want strangers touring their homes. They're nervous about spreading the virus.
Why are homeowners choosing not to list even in a seller’s market?
So people who were considering moving last year might have delayed those plans or canceled them entirely out of fears of infection. Another reason is low interest rates, which are spurring demand among people people who want to buy homes, but also make it possible for people who already own homes to refinance, lower their monthly payments without moving and they don't have to incur the cost and stress of moving. Another reason is that baby boomers are healthy later in life. They're not interested always in downsizing or moving to retirement communities. they want to age in place. And lastly, it's a really competitive market out there. People are worried if they put their home on the market, they're not going to find anything better to buy.
It's a good market to be a seller, but it's a bad market to be a buyer. And so a lot of people just don't want to be buyers in this market. They don't want to get out there and face the same inventory shortage that buyers are facing.
And I imagine there are a lot of homeowners whose finances are still in rough shape coming out of the last financial crisis.
How are low interest rates and refinancing keeping owners from moving?
Yeah, absolutely. And equity has really increased. And so homeowners have a much higher level of equity in their homes now, which is part of the reason that we're seeing a large volume of refinancing, which is allowing homeowners to kind of tap into some of that equity and benefit from the price increase without having to sell their homes.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:05–0:10
2
How is the pandemic driving demand for larger homes?
0:10–1:17
3
How long are homeowners staying in their homes compared to a decade ago?
1:17–1:58
4
What does 'months supply' of homes mean and how low is inventory now?
1:58–3:00
5
Why are homeowners choosing not to list even in a seller’s market?
3:00–4:08
6
How are low interest rates and refinancing keeping owners from moving?
4:08–5:30
7
Are older homeowners staying in large houses and creating a mismatch in supply?
5:30–7:15
8
When might the inventory shortage ease and what are experts predicting for 2021?
7:15–7:24
Speakers
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