LOS ANGELES – April 28, 2014 – Low inventories plague housing markets across the country. It’s giving buyers limited options and sparking more bidding wars, though with sale prices rising, inventory seems to be growing a bit.
However, many current homeowners can’t or won’t sell, with some estimates suggesting that more than half of all existing homes are unlikely to be put on the market anytime soon. An analysis by Redfin looked at transactions across 29 metro areas for single-family homes, condos, and townhomes, as well as mortgages and refinances, since 1999.
Researchers identified a number of event keeping homes from going on the market:
1. Low equity: An estimated 19 percent of homeowners owe more than 80 percent of the value on the home. Many of these low-equity homes were purchased or refinanced during the housing bubble between 2004 and 2009, though the analysts estimate that nearly all will be in the black over the next five years.
2. Low mortgage rate: An estimated 16 percent of homeowners won’t sell quickly because they purchased or refinanced with an extraordinarily low mortgage interest rate – and they won’t get that kind of deal again if they move. (In Redfin’s analysis, a low mortgage interest rate was considered below 4.25 percent.)
3. Purchased or refinanced in the past seven years: Homes owned less than seven years tend not to sell, according to the analysts, because short-term ownership raises a red flag in the eyes of many buyers, as they wonder why the owner wants to move on so quickly.
4. Company or investor owned: A company or investors owns about 3 percent of homes, defined as an entity that bought five or more homes in a metro area during the past 10 years. “These investors are likely holding on to their investment for the capital appreciation and rental income,” the Redfin study says.
5. Ex-owner ownership: Fewer buyers actually sell their old home – many hold onto it as a rental investment property. A Redfin survey of 1,900 prospective homebuyers found that 39 percent said they would rent out the old residence. The percentage was even higher in such markets that have recently seen strong price appreciation.
Source: “Why Aren’t There More Homes for Sale?” Redfin (April 22, 2014), Los Angeles Times (04/05/14) Logan, Tim
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