When we give advice to people about buying property, we are often guided by standard metrics, whereby the average mortgage is outstanding for about five years, meaning that it gets paid off as people move, or refinanced, at about that point. That used to be a proxy for estimating how long someone would stay in a home. Based on that, we would also point out that it took, when the median home price was rising year by year at a steady amount, a few years to break even when selling and buying a new home, considering the costs of moving.
We have known for many years now that people refinance more frequently, or did so when rates were first low on an historic basis. That's been less true recently, as refinancing is not as common as the rates would predict.
What was news to me this week was a Wall Street Journal article saying that the typical homeowner now stays in a property for 13 years in most places. Some of that is tax based. California has long been known for giving an incentive not to move--your taxes get frozen, and, like rent stabilization, that makes people rethink what they would do absent outside considerations. However, it appears that the supply of homes in most parts of the country limits options for moving.
We don't have the new construction here that exists in places with lots of open space to build outside cities, but we do have a generation of young homebuyers, who don't have enough to choose from, when they go to buy. That's because, in part, from another group looking at those smaller houses--downsizing older adults. When new homes do get built, they tend to be large, for the usual economic reasons about lot price vs. home cost. So there is a disconnect between available produce--often priced in our area between $400,000 and a million--and what buyers want, which is smaller and less expensive. Homes between $1 and $2 million tend to be in places where older buyers are choosing location, and they are chugging along as well, on the Shoreline in particular.
How can we lower the 13-year figure, and free up homes to start the cycle? Sellers should list the homes they are thinking about selling. Buyers are once again out there to purchase!
