In February 2012, we began a quarterly survey of our customers to develop a real-time portrait of how active home buyers feel about the market.
Today, we’re launching a companion report, based on a survey of active home sellers on Redfin. For one week beginning last Wednesday (August 10 to August 15, 2012), we surveyed 1,836 people who had used Redfin in the last three months and indicated that they were homeowners. We excluded results from anyone who did not indicate an intention to sell their home. Eight hundred and sixteen people responded across 20 metropolitan markets in the U.S.: Atlanta, Austin, Baltimore, Boston, Chicago, Dallas, Denver, Las Vegas, Los Angeles, New York, Orange County, Philadelphia, Phoenix, Portland, Riverside / San Bernardino, Sacramento, San Diego, San Francisco, Seattle, and Washington DC.
With the number of homes for sale down dramatically from just a year ago—dropping 50% or more in California—and bidding wars breaking out in some areas for the few desirable homes that have hit the market, everyone is wondering: Why is inventory so low, and when will sellers return to the market?
The results of our inaugural Redfin Real-Time Home-Seller Survey give us insight into why there are so few homes on the market this year, and what might be in store in the year to come:
- 80% believe that they would get a higher price for their home by waiting one to two years;
- 46% of respondents are considering renting out their home rather than selling it;
- 32% intend to price their home higher than nearby comparable sales;
- 35% would choose an all-cash offer over higher offers with conventional or FHA financing;
- 49% cited the economy as a major concern with selling;
- 13% believe it is a good time to sell; and
- 61% believe it is a good time to buy.
Taken together, the responses paint a picture of a market composed of reluctant sellers with low opinions of the market today, yet high expectations for the future. Most of today’s sellers believe that it’s a much better time to buy a home than it is to sell a home, and that the market will get better for sellers in the next year or two.
Simply put, sellers have no sense of urgency. Why sell your home today if you believe you’ll get a higher price in a year or two? Homeowners that really need to sell are doing so, but even then nearly half would rather become landlords than take a price far below their expectations.
Data and charts are below. If you’d like the data segmented by market or by other customer demographics, please contact press (at) redfin (dot) com. If there are questions you’d like us to include in the survey next time, please leave a comment below.
The Q3 2012 Redfin Real-Time Home-Seller Tracker
Among home owners planning to sell their home, the majority intend to list their home sometime in the next year:
Sellers Believe it is Still a Buyer’s Market
Although the survey polled only those considering selling their home, more than four times as many respondents feel that now is a good time to buy (61%) than feel it is a good time to sell (13%).
More than a quarter of respondents feel that now is a bad time to sell:
More than Two Thirds of Sellers Believe Prices Will Rise
While just 7% of respondents expect home prices in their area to “rise a lot” in the next year; 65% expect prices to “rise a little.”
Interestingly, although only 72% of respondents believe that prices will rise in their area, 80% believe that they would be likely to get a higher price for their home if they waited a year or two to sell—some 8% of respondents apparently believe that somehow their home will outperform their local market. This result implies that the inventory squeeze may not get better anytime soon, as sellers in many markets continue to wait it out in hopes of higher prices that may be a long time coming.
Renting a Popular Alternative to Selling
Perhaps due to these expectations of rising prices, nearly half of all respondents (46%) are considering renting out their home rather than selling it.
In a typical market, when a homeowner buys a new home the supply of homes on the market is reduced, but it is replenished when she sells her old home. In a market where many owners are buying new homes but electing to rent out their old home rather than sell it, supply is reduced and not replenished. This is likely one factor pushing inventory ever-lower in 2012.
Nearly a Third of Sellers Intend to Overprice Their Home
In yet another sign of the lack of urgency felt by many sellers, when asked how they approach pricing their home 32% of sellers indicated that they would intentionally price their home above local comparable sales, either to build a buffer for negotiation, or because they are willing to wait until the market values their home as highly as they do:
Willing to Take Less Money for a Sure Sale
On the other hand, if presented with three offers: A. All-cash, B. 2% more financed with a conventional loan, and C. 4% higher than the all-cash offer but financed with an FHA loan, only 28% of respondents would prefer the highest offer. Many sellers would rather just sell and be done with the process than risk sinking the deal over strict lending requirements, even if it would mean more money in their pocket when the sale is complete.
Necessity Drives What Little Inventory There Is
When we asked sellers for the reasons that they are selling now, the top two responses were both external factors that necessitate a sale: Relocation and life event were each cited by 30% of respondents:
Sellers Concerned about the Economy
When asked about their “major concerns with selling this year,” the most common response from sellers was “I’m worried about general economic conditions” at 48%. Only 14% of respondents had no major concerns.
“The would-be sellers we surveyed have made it clear that inventory is not going to meaningfully increase any time in 2012, which will limit sales volume gains—and the lift that real estate delivers to the economy this year,” predicted Redfin CEO Glenn Kelman. “We believe the main problem is not, as conventional wisdom would have it, that people can’t sell because they’re underwater on their mortgage. The problem with sales volume is that most home-owners just don’t want to sell. And why would they? Most sellers believe prices will only get better over the next two years, and many can now rent their place for more than their monthly mortgage payment. The great majority of listings come from people relocating to another city rather than listing for market-driven reasons. We believe the owners who are listing their homes will continue to test demand for higher asking prices, while the builders who have plenty of homes to sell will have a big chunk of the market all to themselves.”