In a housing landscape parched for inventory, potential sellers are expected to boost the supply of home for sale in the next six months of 2021.
- 10% of homeowners plan to sell in next 12 months and 76% of potential sellers have taken steps to list
- Potential sellers are expected to boost the supply of affordable inventory as they need more from their homes in 2021
- Majority of potential sellers plan to list in the next 6 months
- More inventory and good timing could persuade more sellers to list sooner
Residential real estate markets have been contending with an imbalance of strong demand meeting insufficient supply for over a year. This imbalance was further exacerbated by the COVID pandemic starting in March 2020 and continuing into the spring of 2021. Based on the latest realtor.com® data from the week of April 17, the national inventory of homes was 53 percent below the same time in 2020. For perspective, compared with the 2017-2019 period, March 2021 saw about 117,000 fewer new listings.
The significant shortage of inventory has pushed the buying activity toward frenzied levels, with buyers waiving contingencies, employing price escalation measures and leading to fierce bidding wars. In light of tight supply, median listing prices rose 17.2 percent year-over-year, marking 36 consecutive weeks of double-digit gains. Stemming from this combination, affordability has become the main challenge for many first-time buyers. Not surprisingly, a recent realtor.com® survey found that over 40 percent of first-time buyers spent over a year shopping for a home.
Within this context, realtor.com® partnered with HarrisX to survey potential home sellers across the country, and shine a spotlight on what their intents and attitudes may mean for housing markets. The information points to an improving landscape, where we can expect to see a rising number of homes come to market over the next few months, offering much-needed relief to homeowners looking for their trade-up home, as well as first-time buyers hoping for a moderation in price gains.
Ten Percent of Homeowners Plan to Sell in Next 12 Months
The survey results show that 10 percent of homeowners across the United States plan to sell within the next 12 months. The figure is noteworthy because it is 25 percent higher than the typical share of homes which come to market in a typical year. It also underscores the fact that while many sellers have been sitting on the sidelines, wary to list their homes in a year marred by a global health pandemic, an economic recession, large job losses, and tremendous uncertainty, with the outlook looking much brighter in 2021, they are ready to act on their delayed plans. And additional 16 percent of homeowners signaled that they are likely to list their homes for sale in the next 2-3 years, a positive signal for a market starved for inventory.
Across generational cohorts, a comparatively larger share of Baby Boomers reported planning to sell in the next year, followed in equal measure by Gen X and millennial homeowners. This hints at the fact that many potential sellers have been caught in an inventory trap wherein the scarcity of available homes prevented them from finding a trade-up house and freeing their existing one. As these cohorts bring their homes to market, the increased supply should provide more options for those needing to buy another home before selling theirs. Geographically, the Northeast region showed the highest comparative share of potential sellers within the next year.
A Majority of Potential Sellers Have Taken Steps to Sell
As we move into the spring season and a time of rising activity, the survey results showed that 76 percent of potential sellers have taken active steps toward selling their home. These ranged from making repairs, cleaning and redecorating, to researching home values and contacting real estate agents. Across demographics, a larger share of Gen X and Gen Z potential sellers took steps to list and sell their homes. Both generational groups tackled repairs and redecorating as the top item on their lists. Geographically, larger shares of potential sellers in the Northeast and West took steps toward getting their homes ready, likely mirroring the unseasonably hot markets and high values in both regions, which may have motivated homeowners to prepare for the warmer months.
Potential Sellers Expected to Boost the Supply of Affordable Inventory
For housing markets which have experienced over eight months of double-digit price gains and a record median price for existing homes in March 2021, the survey offered a clear signal that relief may be on the way. Close to 60 percent of potential sellers indicated that they plan to sell homes at prices below $350,000, which is around the national median. Just as importantly, and additional 28 percent pointed that they were looking to sell homes priced in the $500,000 – $750,000 range, a sweet spot for a large share of trade-up buyers. Combined, these figures indicate that the markets are looking at the potential for significant bumps in the number of affordable and move-up houses, moves which would solve first-time buyers’ challenges and trade-up buyers’ dilemmas.
Looking across generations, larger shares of Baby Boomers and Gen X potential sellers are planning to list homes priced below $350,000, a likely signal that they are ready to move toward their next homes. And reflecting geographic pricing differences the largest shares of affordable homes likely to come to market were located in the Midwest and South.
Potential Sellers Need More from their Homes in 2021
When asked about the main reasons they are considering selling their homes, homeowners listed several important ones. At the top of the list was the fact that current homes no longer meet the needs of their families, in terms of space, features and location. As we learned in surveys over the past 12 months, many homeowners have changed their preferences for housing in the wake of the pandemic, remote work opportunities and affordability shifts.
In addition, close to a quarter of potential sellers indicated that they want to take advantage of the current market. With prices reaching record highs, many homeowners are looking to cash in on the boost to their equity and also make a profit.
Signaling that changing life stages present opportunities, potential sellers listed wanting a smaller house as the third highest ranked reason for considering a sale. The share of those who chose this option were higher in the Silent and Baby Boom generations.
Also, for a significant share of Americans, the pandemic led to re-evaluation of life choices and priorities. These shifts were captured by the 22 percent of survey respondents who indicated that they wanted to live closer to friends and family. This option was also ranked comparatively higher by younger millennials and Gen Z respondents.
Other important reasons for wanting to sell were the desire for different features and amenities, affordability, needing access to money, needing a home office, and the desire for a different geography, not tied to a workplace.
Geographically, the need for different location, space and features was at the top of potential sellers in every major region. A larger share of sellers in the West and Midwest reported wanting to take advantage of favorable market conditions. Comparatively, a larger share of potential sellers in the Northeast noted they were looking for a less expensive house. Home offices were nearer the top of the list for potential sellers in the West, who also pointed that they were not needing to live close to the office, a likely sign that many companies in the technology sector had resorted to longer term remote work plans.
Majority of Potential Sellers Plan to List in the Next Six Months
With the spring season underway, the timing of sellers coming to market is of great importance. As I have highlighted in 2020, the March through May period is responsible for the largest share of total new listings in a year (29 percent). The June through August time frame contributes and additional 28 percent of yearly new listings, bringing the 6-month share to 57 percent.
In light of these numbers, the survey highlights that the next six months are likely to see a noticeable boost to the inventory of existing homes for sale. Over 60 percent of potential sellers indicated that they planned to list within the next six months. Of those, nine percent said that their houses were already on the market, and 10 percent mentioned that they were planning to list in the next 30 days.
The numbers were fairly consistent across generational cohorts, with millennials and Baby Boomers showing larger shares of potential sellers bringing homes to market in the next six months. Geographically, a comparatively larger share of potential sellers in the West noted they were planning to list in the next six months, followed by sellers in the Northeast and South.
Finding the Next Home in Their Price Range is Sellers’ Main Challenge
Topping the list of reasons why potential sellers are not planning to sell their homes in 2021, but rather in the next 2-3 years, is the fact that they cannot find a home in their price range in the current market. This was the top reason for Baby Boomers and Silent generation sellers. It was also listed at the top by larger shares of potential buyers in the Midwest and West regions. The challenge of finding the next home has been a catch-22 for many potential sellers over the past 12 months, as the shortage of inventory coupled with steeply rising prices, prevented many from finding a suitable house.
The second-highest reason listed by potential sellers for waiting was not knowing where they would like to move. Once again, this was a main challenge for larger shares of Baby Boomers and Silent generation sellers.
Tied for third place, the economic climate and the logistics of buying and selling at the same time were the other major reasons for not wanting to sell in 2021. Larger comparative shares of Gen X and millennial sellers found these challenges compelling to postpone listing.
Other reasons for not selling this year were centered on concerns about showing a home during a pandemic, job security, and expenses and complications associated with moving.
More Inventory and Good Timing Could Persuade More Sellers to List Earlier
When asked about the factors which could help move the needle for sellers who are sitting out of this year’s markets, timing was critical. Over 90 percent of potential sellers who are thinking about listing in the next 2-3 years said that they would be more likely to sell this year if they knew they could time the sale. Gen X and Baby Boomer sellers had the highest share of those who would be swayed by an ideal timing. For larger shares of potential sellers in the West and South timing was also an important issue.
Tangential to timing, a significant share of potential sellers said that knowing they could make a lot of money on a home sale could also prod them to sell sooner, followed by a noticeable share of sellers who would list sooner if more homes would come to market in their affordable range. Other reasons that would likely help homeowners think about selling sooner than the next 2-3 years were:
- Someone handling simultaneous buying and selling logistics
- Not having to prepare the home for sale
- Being vaccinated and lower COVID health-risks
- Lower interest rates
- Job change and ability to move farther from work
- Not having to do home showings
Implications for Housing
The survey results point to a likely boom in the supply of existing homes this year, as higher vaccination rates, business re-openings, and an improving employment landscape contribute to higher confidence and consumer spending. Based on recent realtor.com® data, we are seeing the volume of newly-listed homes—a measure of supply—moving on a slight upward trajectory, on the tail of a long and steep decline over the past eight months. The increase in the number of homes for sale will be a welcome change for many buyers frustrated by current inventory.
However, even with this good news, we were in an inventory shortage, for both new and existing homes, well-before the pandemic. It is going to take a while for us to get back to a more balanced ‘normal’ even with an increase in new construction on the horizon.
Methodology: Realtor.com® commissioned HarrisX to conduct a national survey of consumers. The total sample size was 3,998 adults. The survey was carried out online. The sampling margin of error of this poll is ±1.6 percentage points. The figures represent a national view of US adults. Results were weighted for age, gender, region, race/ethnicity, and income where necessary to align them with their actual proportions in the population. In addition to the population of US adults, an oversample was collected for potential sellers. The oversample was weighted to align with the original sample of US adults. There are 657 potential sellers with a sampling margin of error of ±3.8 percentage points.