The housing market is so hot that some homeowners are afraid to sell.
In more normal times, first-time buyers move into original homes. As their family grows, they move on to bigger homes. Eventually, empty nesters and retirees sell their larger homes to downsize or relocate.
Now the record prices are disrupting the usual churn rate. Many households could sell their homes for a large profit, but then they would have to find new accommodation. Many are unwilling to compete in this frenetic housing market, where they could be subjected to the fierce and costly bidding wars that have become commonplace in the United States.
âIt’s hard to upgrade,â said Thad Wong, co-founder of Chicago-based brokerage firm @properties. âEven with low rates and appreciating their home, they can’t find anything better than what they are currently living in,â he said of potential sellers.
Fear of not finding a new home is the latest reason homeowners are staying in their homes longer than in the past. Many baby boomers choose to delay retirement or age up. And now, some young families who want to exchange fear they have been evicted from their neighborhood.
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Brad and Jami Pettiford, for example, bought their first home in October 2015 in Grosse Pointe Woods, Michigan, for $ 162,000. They have since had a second child and want more space. But neighboring homes on their wishlist cost over $ 500,000.
“It makes you think and it makes you think, is it really worth it?” Mr Pettiford said. “It’s like, man, I really love this area, but we’re naturally overpriced.”
With so many homeowners staying put, the housing stock in the United States has rarely been so tight. The number of existing homes on the market at the end of April was down 20.5% from a year earlier, and the number of homes for sale fell to record levels earlier this year.
This scarcity helped drive home prices to record highs and began to slow the pace of sales. The tight supply is one of the main reasons many economists expect home prices to continue to rise, making home ownership prohibitive for many buyers.
Part of the owner’s dilemma is the timing of duplicate transactions. Many families have to sell their current home before they can afford to buy a new one. In a less heated market, buyers can bid on a home that is dependent on the sale of their current home. But today sellers often receive multiple offers, and those with emergency clauses are unlikely to be accepted, agents said.
Some sellers negotiate retrocession agreements, so they can stay in their home for a month or more after they sell while they search for a home. Others move in with their family or find a short-term rental.
âSometimes it backfires, and people end up living with parents for a lot longer than they thought they would,â said Meredith Hansen, COO at Keller Williams Greater Seattle. “I don’t think we can really alleviate the shortage until people feel like they can sell their homes and move out.”
The supply shortage is particularly acute at lower price levels. The stock of existing homes on the market priced between $ 100,000 and $ 250,000 fell by more than 30% in April from a year ago, NAR said, while the supply of homes in selling above $ 500,000 increased.
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Lexi and Brendan McDonald, who have four children, bought a four-bedroom home near Boise, Idaho, in 2019 for around $ 235,000, Ms. McDonald said.
âWe thought, ‘Oh, the boys can share a bedroom and the girls can share a bedroom, and then we’ll have an extra bedroom that we can use as an office,â Ms. McDonald said.
Their children no longer sleep well in shared bedrooms, Ms. McDonald said, and the family want to move to a bigger house. But five-bedroom homes in their area cost at least $ 400,000, she said.
The Boise metropolitan area posted the fastest growth in house prices in the country in the first quarter, up 28.2% from the previous year, according to a ranking by the Federal Housing Finance Agency. 100 largest metropolitan areas in the country.
âOur house is probably worth around $ 330,000 or $ 340,000 at this point, which is fantastic, but we couldn’t afford to move anywhere,â Ms. McDonald said. They are considering moving to Texas.
Catherine and Blake Winslow were successful in making the moving purchase work. They listed their original home north of Salt Lake City, which they bought in 2013, and included a 60-day rent as a condition of the sale. Then they started to shop aggressively, visiting dozens of homes.
They lost twice to top bidders. âAll of our family and friends were like, ‘You can sell, but where are you going?’ And we were starting to feel they were right, “Ms. Winslow said. They looked for short term rentals in case they couldn’t find a home within the 60 day time frame.
They ended up getting an offer accepted on an owner’s sale list and moved in April.
âWe feel incredibly lucky,â she said.