With widespread housing inventory shortages hitting many American metros, one contributing factor cited by some experts is that more homeowners are simply choosing to stay put in their current homes, for a variety of reasons. Now a new survey is putting this trend under the microscope.
According to a survey conducted by Bankrate, 62 percent of surveyed homeowners said they had no plans to move out of their current home, whereas 30 percent said they planned to move sometime within a decade. Breaking it down further, 21 percent said they planned to move within 0-5 years, 14 percent said they planned to move within 6-20 years, and just 3 percent said they planned to move, but not for more than 20 years.
“One of the unintended consequences of staying put in their homes is the reduced supply of homes being put on the market,” says Mark Hamrick, Bankrate Senior Economic Analyst. “This is one of the underpinnings of rising home prices, which have outpaced growth in wages by a substantial margin.”
Of those who plan to stay put, 35 percent said they planned to remodel or renovate their current home sometime within the next five years. This echoes findings reported by the National Association of Realtors earlier this year. In a January NAR report, homeowners are staying in their homes an average of 12-13 years, and that report also noted a significant number of homeowners planning to make renovations or additions to their home during that time.
So, what factors are convincing these homeowners to stay in their current domicile? Skyrocketing home prices, unsurprisingly, are playing a major role, as are increasing interest rates. Twenty percent of those surveyed by Bankrate own their home without a mortgage, so the prospect of leaving their current residence and having to face both high prices and high interest rates could be daunting. Nearly a third of those surveyed were in the process of paying off a mortgage loan, with a median mortgage rate of 3.95 percent. The average 30-year fixed mortgage rate is currently 4.73 percent, according to Bankrate.
In the latest installment of First American Financial Corporation’s Potential Home Sales model, First Am Chief Economist Mark Fleming spotlighted two phenomena that were making homeowners hesitant to sale. The first was rising interest rates. The second was housing supply shortages—even though homeowners choosing not to sell is only exacerbating this problem.
“Potential sellers face a prisoner’s dilemma,” Fleming said, “a situation in which individuals don’t cooperate with each other, even though it seems in their best interest to do so. If sellers all choose to sell, they would all benefit as buyers because they would increase the inventory of homes available and alleviate the supply shortage. However, the risk of selling if others don’t in a market with a shortage of inventory prevents many existing homeowners from selling. The result is prices are further bid up by competition for the increasingly short supply.”