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Americans are staying put in their homes longer, contributing to the limited number of homes for sale. First American has put a number on the likely size of the loss for the current housing market: The length of the average homeowner’s tenure has resulted in a loss of more than 17,000 potential home sales.
The statistic appears in First American’s just-released Potential Home Sales Model, reflecting May data.
The average homeowner’s tenure has jumped by nearly 4% compared to a year ago and by 0.4% compared to April. The monthly gain is the largest since August 2020, First American reports.
“Since existing homeowners supply the majority of the homes for sale, and increasing tenure length indicates homeowners are not selling, the housing market faces an ongoing supply shortage,” said Mark Fleming, First American’s chief economist.
Prior to the housing market downfall in 2007, the average length of time a homeowner lived in their home was about 5 years. During the aftermath of the housing market crisis between 2008 and 2016, the average homeowner tenure length grew to about 8 years. As of May this year, the average homeowner tenure length has reached 10.6 years, a historic high, First American reports.
“Two trends are locking homebodies in place and driving the increase in tenure length,” Fleming says. “First, for homeowners with rock-bottom rates, modestly higher rates in a historically low inventory environment may disincentivize some from selling their homes, thus preventing more supply from reaching the market. Second, seniors are choosing to age in place.”
Additionally, the homeownership rate among baby boomers increased in 2020. If seniors and adults born from 1931 to 1959 behaved similarly to earlier generations, they would have released nearly 1.6 million additional housing units to the market by 2018, shows a 2019 study from Freddie Mac.
“As seniors continue to choose to age in place, there will be fewer existing homes available for sale,” Fleming says.
Fleming and other housing leaders, including the National Association of REALTORS®, have been calling for more housing to meet demand. NAR and the Rosen Consulting Group released a report last week calling for a “once in a generation” response to address decades of underinvestment and underbuilding in the housing market. The nation has faced a shortfall of 5.5 million to 6.8 million housing units since 2001, according to the report. White House Director of the National Economic Council Brian Deese cited the report on Twitter last week. Read more: ‘The State of America’s Housing Stock Is Dire’
“It all comes down to the fundamentals,” Fleming says. “House-buying power drives the market potential for existing-home sales, but market potential is limited by what you can buy. The demand for homes is strong as millennials continue to age into homeownership, mortgage rates remain low, and the economy begins to improve. Yet, we need more existing homes for sale to satisfy this growing demand. You can’t buy what’s not for sale—and the homebodies don’t seem ready to relieve the supply pressure, keeping a lid on market potential growth.”