Why Aren’t More People Selling Their Homes?
Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
Inventories of homes for sale are so low this spring that bidding wars are breaking out in overheated real estate markets. Rising prices and shrinking supplies are hitting buyers with a double whammy as they anxiously scroll through limited choices to find a house to buy before prices and mortgage rates rise even more.
In California and Arizona, sales contracts are being consummated in 24 hours or less. These flash sales attest to the frenetic fever that’s infecting the hottest real estate markets, where inventories are 30 percent to 60 percent lower than a year ago.
What’s going on? In economics class, we were taught that demand coupled with short supplies results in higher prices, encouraging owners to sell and restoring equilibrium. In real estate markets, however, it’s just not that simple.
Here are the three major reasons that sellers aren’t selling even when prices are rising.
1. They owe more than their houses are worth. Though rising values are lifting many homeowners out of negative equity, 10.4 million homeowners (21.5 percent of all residential properties with a mortgage) were still in negative equity at the end of the fourth quarter of 2012, according to a recent CoreLogic report. Of the 38.1 million residential properties with positive equity, 11.3 million have less than 20 percent equity. These borrowers, referred to as “under-equitied,” may have a difficult time obtaining new financing to refinance or buy a new home due to underwriting constraints.
Under-equitied mortgages accounted for 23.2 percent of all residential properties with a mortgage nationwide in the fourth quarter of 2012. That’s a grand total of 44.7 percent of homeowners with a mortgage. Negative equity is a bigger problem in hot markets like California, Arizona, and Florida than elsewhere because those markets experienced greater swings in home values over the past seven years.
2. They can’t afford to buy. Most home sellers are also homebuyers. In hot markets, move-up buyers are having almost as hard a time as first-time buyers finding affordable houses. Unless they have owned their existing home for ten years or more and will realize a significant profit, move-up buyers may find themselves ending up with a loss.
3. They can’t get financing. Many move-up buyers are having the same (or worse) problems getting financing as first-time buyers. They haven’t been in the mortgage market since the tough new lending standards were enacted. FICO scores and down payments are higher, debt-to-income and loan-to-value ratios are lower, and, most importantly, documentation is tougher today, especially if you’re self-employed, paying alimony, co-signatory on another loan, or retired.
If move-up buyers can’t buy, they don’t sell. The result is a huge logjam in the housing ladder that makes it harder for first-time buyers to find starter homes and for empty nesters to sell the family home for something smaller.
Time will make all the difference. For seven years, most owners have postponed thoughts of selling. Although prices are rising suddenly in some markets, it doesn’t mean that homeowners are prepared to respond quickly. Families don’t easily make a major decision like selling their home and moving to a new one. Even when the decision is made, there are many steps involved in the process: preparing to sell, finding a new home, and rearranging the family’s life. It can take months before a house is ready to be listed.
Time will also see rising values lift more owners out of negative equity to put them in a position where moving will be possible. Sellers will sell in good time, and real estate markets that seem out of control today will return to a degree of normalcy.
Steve Cook is Executive Vice President of Reecon Advisors and covers government and industry news for the Reecon Advisory Report.
Cook is a member of the National Press Club, the Public Relations Society of America and the National Association of Real Estate Editors, where he served as second vice president. Twice he has been named one of the 100 most influential people in real estate. He is a graduate of the University of Chicago, where he was editor of the student newspaper. In addition to serving as managing editor of the Report, Cook provides public relations consulting services to real estate and financial services companies, and trade associations, including some of the leading companies in online residential real estate.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.