Why sell when you still have that new-house smell?
A Redfin report found that nearly 60% of homeowners with mortgages have lived in their home for 4 years or less, and almost all have low interest rates.
Key points:
- Homeowners may not be in a hurry to sell, in part because they haven't lived in their homes very long.
- The length of time Americans typically stay in a house before selling varies regionally from 6-18 years.
- Locked-in low rates are another disincentive: Nearly 92% of homeowners with a mortgage have a rate under 6%.
While elevated mortgage rates are keeping many potential sellers on the sidelines, a new Redfin report points to another factor: Many aren't in a hurry to move because they've only been in their house for a few years.
The report, based on data from the Federal Housing Finance Agency, found that nearly 60% of homeowners with mortgages have lived in their home for four years or less, up from 47.3% in the fourth quarter of 2019.
"The portion of people who haven't lived in their home long has shot up because so many people purchased homes during the pandemic, motivated by record-low mortgage rates and remote work," said Redfin data journalist Dana Anderson, author of the report. "That means that even if rates were to drop significantly, it may not lead to a flood of new listings."
The average time Americans stay in a home varies by region, ranging from 6-18 years in the 100 largest metro areas, according to the National Association of Realtors.
"Housing supply shortage and low affordability are two of the main reasons that people stay longer in their homes," said Nadia Evangelou, senior economist at NAR, in a report from 2020.
Both of those factors — limited supply and a lack of affordable homes — are definitely in play in the current real estate market.
"The only people selling right now are the ones who need to," said Jasmine Harris, a Redfin agent based in Atlanta. "In more typical times, we'd have people selling simply because they wanted to move to a different neighborhood or wanted a bigger home and/or one with different features."
Almost all existing mortgages have rates below today's levels
Redfin also found that, not surprisingly, people are holding onto their low-interest mortgages, including homeowners who may have missed out the historically low rates of 2020 and 2021 but still have rates below today's levels — which is almost everyone.
Nearly 92% of U.S. homeowners with mortgages have an interest rate below 6%. That's down only slightly from a year ago, when it was at 93%. And almost two-thirds of homeowners with mortgages (62%) had the good fortune to snag an ultra-low rate of less than 4%.
"High mortgage rates are a double whammy because they're discouraging both buyers and sellers — and they're discouraging sellers so much that even the buyers who are out there are having trouble finding a place to buy," said Redfin Deputy Chief Economist Taylor Marr.
"The lock-in effect is unlikely to go away in the near future," Marr added. "Mortgage rates probably won't drop below 6% before the end of the year, and most homeowners wouldn't be motivated to sell unless rates dropped further. Some of them simply don't want to take on a 6%-plus mortgage rate, and some can't afford to."