A year of record low inventories of homes for sale and improving prices may finally be catching the attention of millions of prospective home sellers. Is a seller’s market in the offing?
According to a November consumer survey released today, 22 percent of homeowners said they are likely or somewhat likely to sell in 2013. Should the sales materialize, the number of homes on the market next year would increase five-fold over 2012. Annualized sales were 4.71 million (as of October), or about 6.2 percent of the nation’s 75 million owner-occupied homes.
The survey found that homeowners who bought their homes between 2010 and 2012 and have owned then less than two years are more likely to sell than those who have lived in their homes longer. One out of three homeowners (33 percent) who bought their homes in the past two years said there are likely to sell next year compared to 20 percent who bought before 2002.
Most of the new owners seeking to sell are probably move-up buyers who won’t be adding to the overall inventory but will be vacating entry-level homes, which are in high demand in most markets. For years, low home values have frozen move-up buyers in place, many of them underwater. Today 22 percent of owners with a mortgage still owe more than their homes are worth.
“2013 could be the year that inventory turns around, just as 2012 was the year that prices started recovering,” said Jed Kolko, Trulia’s chief economist. “Homebuyers need inventory to choose from, and with fewer foreclosures on the market, new inventory will come from new construction or homeowners wanting to sell. Rising prices will bring out more sellers, especially if price increases lift them back above water. ”
The Trulia survey also looked at attitudes towards homeownership. Millennials (18-34 year olds) said they haven’t completely written off homeownership. In fact, 72 percent of these young adults said homeownership is part of their personal American Dream, which is the same as the adult population overall. Among renters in this age group, 93 percent plan to purchase a home someday. Meanwhile 43 percent of young adults are homeowners already.
Yet despite these long-term aspirations, Millennials have much more negative expectations for the housing market in 2013 than older generations. Younger adults have a harder time imagining price increases and higher mortgage rates than older adults who have lived through more years of rising prices and high rates. Just 37 percent of Millennials expect prices to rise in the next year, and 22 percent expect prices to fall:
“Millennials have been shaken, not scarred by the housing bust,” said Kolko. “Nearly all of them want to own a home someday, if they’re not homeowners already. But many of them think today’s low prices and low mortgage rates will last. They may be in for sticker shock if the cost of homeownership has returned to normal levels by the time they’re ready to buy.”