Real estate markets mirrored Americans’ changing realities during an unprecedented 2020-21 period, when the global COVID pandemic impacted daily lives on a large scale. Following the sharp drop in activity during the Spring 2020 quarantines, markets rebounded through the second half of the year, and continued on a hot streak in the first months of 2021, as buyers looking for the safety of a home ran against an extremely limited number of properties for sale.
For homeowners who planned to sell, this year proved to offer an extremely advantageous position, with markets dominated by multiple bids, price escalation clauses, contingency waivers and all-cash offers. As a result many sellers moved to cash in on their built-up equity and list their homes. At the same time, many homeowners found themselves reluctant to sell their homes given that they had a difficult time finding a suitable replacement. The inventory shortage proved a catch-22 for many home sellers, who could not find an affordable next home, even when selling their current one for top dollar.
Within this context, we surveyed American homeowners planning to sell in March 2021 and detailed their experiences and attitudes. This fall, as the market started to settle into a more typical seasonal pattern, more common in pre-pandemic times, we followed up with American homeowners to find out how they weighed their decision to enter into the housing market.
More Homeowners Plan to Sell Their Homes in Next 12 Months
In September and October, we surveyed 1,300 consumers about their homeownership status, and found that 26% of homeowners surveyed plan to sell their home in the next 12 months. Younger generations seem to be more eager to sell as 34% of Gen Z homeowners and 49% of millennial homeowners plan to sell, while only 26% of Gen X homeowners, 11% of Baby Boomers, and 8% of the Silent Generation plan to do the same. Interestingly, 29% of Gen Z homeowners and 54% of millennial homeowners have also sold a home in the last 6 months, compared to 22% of all homeowners, and only 4% of Baby Boomers and 3% of the Silent Generation homeowners. Selling is more popular in urban areas, with almost half (46%) of urban homeowners planning to sell while only 19% of suburban and 11% of rural homeowners plan the same.
The share of American homeowners who plan to sell their homes within a year increased from 10% in the Spring to 26% in the Fall, a significant increase. The advance was most pronounced for homeowners in the younger generations, led by millennials, along with Gen Z and Gen X.
Young Homeowners Eager to Sell
About half (46%) of homeowners plan to sell in the next 3 months. Younger homeowners seem especially eager to sell with 31% of Gen Z homeowners and 38% of Millennial homeowners planning to sell in the next 30 days. The majority of the Silent generation (84%) plan to sell in 2022, as well as 42% of both Gen X and Baby Boomer homeowners. In anticipation of selling, 93% of sellers surveyed have taken steps to prepare.
This year’s real estate markets were strongly skewed in sellers’ favor, as a large number of buyers vied for a tight inventory of available homes. Sellers took note of the competitive landscape and moved to take advantage of it, alongside their plans. In our Spring survey, only 9% had listed their homes, while 63% were planning to list within the following six months. In the Fall survey, a larger 19% share had listed their home for sale, and 65% of sellers reported planning to sell within six months.
The most common preparations include researching both neighborhood and own home values, making repairs, cleaning, and redecorating, researching the selling process, and searching for a new home. Millennials have taken more steps to prepare for selling than the total group of sellers. The older generations, Baby Boomers and Silent generation, are more likely to not yet have taken steps to prepare for selling, which aligns with their likelihood to be selling in 2022, later than the average Gen Z, Gen X or Millennial seller.
Echoing the changing landscape, the share of homeowners who planned to sell and took active steps toward it increased from 76% in Spring to 93% in Fall. Interestingly, larger shares of homeowners across all demographic groups took action to prepare their homes for listing, from researching neighborhood values, to making repairs, or looking for a new home to buy.
Millennial sellers expect to sell their homes for the most with 49% expecting to sell for $750,000 or more, versus 36% of all respondents. Across the full respondent pool, 61% of sellers intend to sell for between $200,00 and $1,000,000, and 20% intend to sell for over $1,000,000.
With a competitive market marked by multiple bids, price escalation clauses and contingency waivers, Spring 2021 saw sharp price increases. The trends seem to have motivated homeowners across a wider price spectrum to list their homes. While 58% of sellers in Spring were planning to bring a home priced at or below $350,000, that share dropped to 34% by the Fall. The shift was driven by homeowners higher up the price spectrum. The share of sellers planning to bring homes to market priced over $1,000,000 amounted to only 7% in the Spring, but rose to 20% in the fall months.
Even as market activity moved from overheated early in the year to a more seasonal balance in the second half of the year, the number of available homes at affordable prices remained tight, driving affordability challenges higher for first-time buyers, especially as mortgage rates moved above 3%.
Sellers Hope to Take Advantage of Hot Housing Market
The respondents who plan to sell in 2021 cite a variety of reasons for selling, with the most common being that their home no longer meets the needs of their family. Additionally, many sellers hope to take advantage of the current market. Gen Z sellers are especially influenced by the possibility of success in the current market, while Millennial and Gen X sellers are looking for something different that is better suited to their family’s needs that have been made clear by so much time at home. Older generations are looking for smaller homes that are less work.
When we asked homeowners across the country why they considered selling, several topics surfaced, led by the fact that current homes no longer met their needs, in terms of space, features and location. As we discussed in prior research, the COVID pandemic changed what Americans want in their homes, spurred by the need for distancing, more flexible spaces and affordability. Close to four-in-ten homeowners in the Fall survey mentioned their current home was no longer fitting, compared with 30% in the Spring.
Given the extended time spent at home over the past 18 months, the share of homeowners who realized that they wanted different features and amenities in their homes—be it walkability, outdoor space, pool, or others—doubled from the Spring to the Fall.
At the same time, market conditions also permeated homeowners’ perspectives. The second-highest ranked reason to sell was the desire to take advantage of market conditions, which garnered 24% of responses in the Spring and 35% in the Fall. Closely tied to it, over twice the share of homeowners in the Fall mentioned that news related to a seller’s market prompted them to consider listing their home.
There were several other notable shifts in homeowners’ circumstances between Spring and Fall. The share of home sellers who reported needing a home office for their new remote work environment tripled, as did the share of those who no longer need to live near an office. Remote work has made significant changes in how Americans work and live, driving visible changes in what people want from their homes.
Also interesting, the share of sellers who felt they may have bought their home in a hurry only to find it was not a good fit more than tripled, going from 6% in the Spring to 21% in the Fall. In addition, the share of sellers who felt financial pressures and needed to sell went from 8% in the Spring to 19% in the Fall.
High Home Prices Make Some Sellers Wary
For respondents who plan to sell after 2021, we asked why they are not planning to sell in 2021. The majority of respondents who are not going to sell in 2021 cannot find a home in their price range, are wary of the current economic climate, or are unsure of where they would like to move. The most common reason these sellers would choose to sell earlier is if these sellers knew where they’d like to move, followed by if they knew they could make a lot of money, or could find good home options they could afford. Around half of Baby Boomer and Silent Generation sellers would consider selling earlier if they knew where they hoped to move.
The top reason cited by sellers for postponing listing their home was the lack of available inventory. As market indicators illustrated throughout the year, the tightness in the number of homes for sale was a major driver of imbalanced dynamics. Survey results showed this shift, with the share of sellers unable to find a replacement home rising from 25% in the Spring to 28% in the Fall. The economic climate was the second ranked reason for not selling this year, and concerns increased slightly from early in the year to the latter part. In tandem with the economy, sellers’ concerns about their job security was also an important reason to postpone a sale.
Market Conditions Impact Sellers’ Terms
Q28 The current state of the market has impacted the terms 90% of sellers will ask for. The most common examples of this impact are asking for more than the seller believes their home to be worth (42%) and refusing to pay for repairs found during the inspection (34%). Generationally, younger generations especially plan to alter their terms due to the market with 95% of Gen Z, 96% of Millennials and 92% of Gen X planning to do so. Only 74% of Baby Boomers and 45% of the Silent generation plan to alter terms due to the hotness of the current housing market.
In keeping with the reality that this year’s housing has been a seller’s market, a growing share of homeowners planning to list indicated that they expected to control the terms of the transaction. While 73% of sellers in the Spring expected to influence the sale terms, by Fall, 90% of sellers felt confident that they would.
A little over four-in-ten sellers plan to ask for a higher price than they think their homes are worth, a noticeable change from Spring’s 29%. A third of sellers do not plan to pay for repairs or improvements noted in a home inspection, and over a quarter will not accept some contingencies. These factors highlight the highly competitive nature of real estate markets in 2021.
Moreover, 99% of sellers expect to receive some combination of tailwinds in selling their home in 2021, including buyers to forgo inspection/appraisal (44% expect), to get the full asking price (43%), to have an offer within a week (42%), to get more than asking (39%), to have a bidding war (38%), or to receive an all-cash offer (35%). Millennial sellers are especially bullish in their expectations, with half expecting buyers to forego contingencies (appraisal/inspection), and close to half expecting an offer within a week and even a bidding war.
Echoing the theme of intense market competition, sellers showed higher expectations in the Fall compared with the Spring market, even though market conditions have adjusted. Larger shares of sellers expected buyers to forego contingencies, while navigating a bidding war in which all-cash offers may be prevalent. The only category which diminished from Spring to Fall was sellers’ expectation to get their asking price.
It will be interesting to observe how seller expectations adjust in light of the market shift toward more typical seasonal trends. As we moved into fall, more supply led to a slowdown in price growth from double-digits into a narrow range between 8% – 9 %.
Sellers Are Optimistic About Sale Price
Reinforcing the sellers’ perception of the recent hot market, 93% of sellers expect to sell their home for more than they paid for it. Interestingly, 8% of respondents expect to sell their home for more than double what they paid. Despite this pervasive expectation, 89% of sellers would accept an offer at listing price if it was the only offer they received. The younger generations seem especially willing to accept an offer at listing price, as 97% of Gen Z sellers and 91% of Millennial sellers respond with their willingness. Similarly, 93% of urban dwellers would be willing to accept an offer at asking price.
In a nod to changing market realities—an improvement in supply moderating price growth, and paired with rising mortgage rates—sellers seemed to temper slightly some of their price expectations from the Spring to the Fall period. While 94% of Spring homeowners planning to sell expected to sell their home for more than they paid, in the Fall, 93% shared the same expectation.
Looking across generational cohorts, Gen X and Gen Z homeowners were the only groups to show a downward adjustment in price expectations. For younger buyers, the short tenure in the home may be a strong motivating factor, especially if they bought their home during the past two years as prices moved strongly upward.
Moreover, 77% of sellers would be willing to accept an offer below asking price if they did not have to prepare their home for sale. A sizable portion of sellers (15%) would be willing to accept an offer more than 7% below asking price if they did not have to prepare their home for sale.
Perhaps the strongest signal that Fall sellers started seeing the shifts in their local markets from an overheated pace to a more seasonal one came from the question asking them about their willingness to accept a lower price in exchange for a quicker close. In the Spring survey, 54% of sellers indicated that they would accept a lower offer. That share rose to 77% in the Fall survey.
The adjustment in price expectations was highest in the millennial generation. In the Spring, 60% of millennial homeowners would have accepted a lower price in exchange for a faster closing. By Fall, that share rose to 87%. Baby Boomer and Silent homeowners also notched noticeable shifts in their willingness to accept less money for a quicker transaction.
Most recent sellers sold their homes for at or above their asking price, and a sizable portion (24%) received an all-cash offer. Consistent with the expectations of future sellers, 30% of recent sellers were able to sell within a week, 30% sold to buyers who waved contingencies, and 29% had a bidding war for their home.
After selling their home, 36% of sellers plan to enter the market as a buyer to find a home to live in, and 26% plan to move into another property that they own. Interestingly, 25% of Gen Z sellers plan to purchase a mobile home/RV, perhaps in response to the ever growing possibility of remote work.
George Ratiu, Hannah Jones
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