Tucked inside a WSJ article about Zillow and Opendoor cutbacks, there was a chart of the average tenure of US homeowners. I wasn’t aware of this trend. The average homeowner now stays put for 4 years longer than before the 2008 crisis (8.2 vs. 4.2 years).
A different WSJ article revealed that the amount of housing inventory available for sale is the lowest in 37 years on a per capita basis (the entire time this data series has been tracked). However, the two charts don’t fully match up. From 2000-2008, people consistently switched homes about every 4 years, but the inventory went up and up. After the 2008 recession, people both started staying in place and the inventory went down.
If the economy was improving from 2009 to 2019 (up until recently of course), why did homeowners move less and less often? Mortgage interest rates? Mortgage underwriting standards? Boomers choosing to age in place? Millennials preferring to rent, not buy? Lack of new housing construction? I feel like there is something meaningful behind all of this, but I don’t know what it is.
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Could it be that during that crisis apartments became in higher demand so that’s what was being built more since then and not new homes? Could also be the AirBnBs removing a supply of houses from the market. And maybe the lack of open real estate to build on?
On the other hand, as baby boomers retire, they maybe moving around less while the younger folks don’t have the funds to move around as often? Housing ownership is Significantly down in younger generation as compared to the same age stats for older generations.
My guess is that it’s mainly the lack of new construction in desirable locations. We managed to buy a house in a nice suburb about 4 years ago, it’s appreciated 36% since then, but it jumped 15% almost immediately. If we had just waited another year or so, we would have been priced out of our neighborhood. Houses around us are still being sold before they go on the market.
I love out neighborhood, but current residents have too much power to keep things the same and prevent new construction. And when you have a deal that’s this sweet, you’re going to be very hesitant to give it up.
I’m sure a good amount of this trend is just demographics. The boomers are fully aging into retirement and they aren’t going to be house flipping in their 70’s or 80’s Senior citizens are normally an outsized % of homeowners. The older you are the more likely to own.
-aging population. Older people does not move as much
-more dual income households. It is harder to pick up and move when two people are working.
-job opportunities and salaries are more equal than before.
It will be interesting to check these charts again in a year. There is a chance people might have to sell as a result of the current crisis. This could bring inventory up and you could see buyers pull back.
For me, a big barrier to moving is the $50k+ in realtor fees, inspections, clearing the title, mortgage fees, etc. Because many of these fees are based on a percentage of the purchase price they often appear reasonable, but when you add up the actual dollar amount they are prohibitive
You are on to something..would be curious to read a followup summary as to what the possible reasons might be..
Interested to see the comments on this, student debt and housing starts come to mind.
https://tradingeconomics.com/united-states/housing-starts
I wonder if it’s because the mortgage note buyers were able to work out affordable payments with the homeowners? I used to work for a real estate brokerage who was a Fannie Mae foreclosure service provider. After decades of working with them, her contract with Fannie Mae was put on hold in about 2017. She told me that Fannie Mae was retraining a lot of their service providers to be loan originators instead. At about the same time, I became more aware of the note buying industry. I think Fannie Mae was selling more and more of their non-performing notes to the hedge funds and other note buyers, letting them deal with refinancing and expensive evictions, foreclosures, and rehabs. The note buyers I know are honest, hard-working people, striving to keep people in their homes if there was any show of willingness from the mortgagee to work towards a solution.
Valuable insights like these is why I continue to follow your blog. Was not aware of this huge change – and I work in the mortgage industry.
I’ve been an active participant in a very smart real estate blog (they called the housing bubble long before it became fashionable). There were two major issues which contributed to the reduction in housing moves. The first was already mentioned here. An increase in aging population (sorry Millennials) who tend to move less frequently since no career means no need for mobility. The second is a phenomenon that occurs during any deep recession, which in this case, was brought on buy the housing/fiscal crisis. Due to the lack of job/financial security experienced by the Millennials (sorry again) and the need for job mobility, home purchase reduced dramatically as rentals increased proportionately. New families were waiting longer to both formulate (delayed marriage) and fornicate (delayed having kids). This also lowered the demand for home sales (and construction). A third possibility is a change in social culture. Millennials are much less physically social and spend more time entertaining themselves with friends online rather than in person. The extra space that a home typical affords for entertaining is less of a necessity.
Of course, I could be completely wrong. 😛
Hey, did you ever pick up a new office chair Jonathon?
I did just order a new office chair, but it was more of a win by default than anything interesting. I currently have a cheap high back chair with bonded “leather” that is actively shedding into little bits all over my floor from both the “leather” and the fabric bottom (think Avengers Endgame), but it did last about 8 years for $120. My only addition was a $20 gel cushion bottom. I wanted to upgrade to a ~$500? chair of higher quality, but given the current situation I can’t really try any chairs out in person. Many of them are sold out as it is. So, I basically just ordered something close again that was in stock from Amazon and figured I’d revisit again in 5-10 years. For the curious:
https://amzn.to/2yXwfLi
I wonder if cash out refinancing may also have been a factor. Many were using their home equity like an ATM pre GFC and if they were underwater they would be less likely to sell post GFC.
Another factor in the past 10 years is the decrease of homeownership rates generally.
Since the recession we saw a drop in the % of people who own homes with more people renting instead. I’d guess that those extra people who rent now are usually more mobile and more likely to buy/sell homes, So instead of seeing those more mobile people buy/sell homes they’re instead just changing rentals.
Any guess as to how the current crisis is going to impact things? My sense is that a lot of sellers have pulled their homes from the market (further decreasing supply). On the other hand, an economic crash doesn’t do great thing for the pool of potential buyers.