Economists' Outlook

Housing stats and analysis from NAR's research experts.

Homeowners Remain Reluctant to Move/Sell as of January 2019

REALTORS® reported that seller traffic weakened in January 2019 compared to conditions one year ago. The REALTORS® Seller Traffic Index registered 42 in January 2019, according to NAR’s January 2019 REALTORS® Confidence Index Survey.[1] A  level below 50 indicates more respondents reported weaker seller traffic than stronger seller traffic in January 2019 compared to one year ago. The index has never crossed the 50 level since September 2008.

Across the states, the REALTORS® Seller Traffic Index compiled from responses during November, December, and January 2019 was “weak” in many states (delineated at 25 to 45[2]), except for Nevada, Idaho, Hawaii, South Carolina, and Florida where there was no change in seller traffic.

Several trends explain or are associated with the reluctance of homeowners to sell:

First, the number of movers has generally been on the downtrend since during 1985-1986.  During 1985-1986, there were 46.470 million people who moved, or 20.2 percent of the population, and by 2017-2018, there were only 32.352 million movers, or 10.1 percent of the population.  Comparing 2017-2018 with 2016-2017 data, there were 2.55 million fewer movers during 2017-2018 (32.352 million) than during 2016-2017(34.902 million), with the fraction of movers declining from 11 percent in 2016-2017 to 10 percent in 2016-2017.

The decline in mobility rates is also reflected in the lower turnover rate, or the ratio of existing homes sold to owner occupied housing stock.  In 2005, there were nearly 10 houses sold for every 100 owner occupied homes. The turnover rate dipped to 4.8 in 2010 Q3 and was on the rise as the housing market recovered, peaking to 7.3 in 2017 Q1 and Q2. It has since fallen to 6.8 homes in 2018 Q3, as interest rates have increased.

Higher mortgage rates discourage existing homeowners from moving and selling as they must also purchase another home, unless they decide to rent (“rate lock effect”). The period 2012 through 2017 saw historically low mortgage rates of around four percent, during which 30.9 million existing homes were sold. However, mortgage rates rose in 2018 to an average of 4.5 percent as the Federal Reserve raised the federal funds rate four times in 2018.  In NAR’s January survey, 15 percent of respondents who had seller clients reported they had a client who decide to not sell/move due to the rate lock effect, which amounts to about 56,000 clients in a month.[3]

The construction of new homes remains below household formation. Existing homeowners who decide to sell/move will either purchase an existing home or a new home (unless they become renters). If existing homeowners are not selling, then the supply must come from new homesHowever, the supply of new homes has been inadequate to even meet household formation. As of 2018 Q3, housing starts averaged 1.23 million on an annualized basis, which is still below the 1.56 million net increase in households. Moreover, the fraction of 1-unit housing starts remains below the historical norm of about 80 percent. As of 2018 Q3, 1-unit housing starts accounted for only 71 percent of total housing starts. These 1-unit housing starts are mostly for home ownership, while multi-family units are usually for rent. Moreover, the fraction of homes on the market at the lower price range has been shrinking: the fraction of existing homes sold at $250,000 or below accounted for only about half of existing home sales, down from 72 percent in 2008.

Finally, decisions to age-in-place, marry later, and live in multi-generational homes play a factor. The fewer number of movers may be related to aging-in-place among seniors (90 percent of 65 and older prefer to age in place, per AARP), the increase in marrying age (27.8 years among women in 2018; 25.1 years in 2000), and the increase in fraction of adults living at home with elders (31.9 percent in 2018; 27.7 percent in 2000).

[1]In a monthly survey of REALTORS®, NAR asks respondents “Compared to the same month (January) last year, how would you rate the past month's traffic in neighborhood(s) or area(s) where you make most of your sales?” NAR compiles the responses into an index, where an index above 50 indicates that more respondents reported “stronger” traffic than “weaker” traffic.  In generating the buyer traffic index at the state level, NAR uses data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations.

[2] Although an index of 50 represents no change, NAR delineated less than 25 as “very weak” and 25+ to 45 as “weak”, 45+ to 55 as” stable”, 55+ to 75 as strong” and 75+ as “very strong

[3] NAR has about 1.034 million members in the DC and 50 states. According to 2017 Member Profile, 65 percent were licensed as sales agents (exhibit 1-2), and 65 percent of sales agents were primarily in residential brokerage (Exhibit 1-4), and approximately 85 percent had seller clients (NAR RCI survey)