Introduction
The spring 2022 real estate markets are moving in tandem with shifting macro trends. The imbalance between supply and demand remains a dominant feature of the landscape, pushing list prices to new highs. At the same time, rising inflation combined with the change in monetary policy has resulted in an over 200 basis point surge in mortgage rates over the past four months. In the process, many buyers are being priced out of the market. Meanwhile, home sellers, who have been firmly in the driver’s seat for the past year and a half, are finding more competition from other sellers, as the number of new listings grows higher compared with a year ago.
Importantly, a noticeable share of sellers in 2022 are trying to buy their next home at the same time, adding complexity to an already challenging task. While sellers stand to cash out record-high equity upon closing on their home, they are also facing higher prices and interest rates on their next home. While some may be faced with the potential of being locked-in by a low mortgage rate, other homeowners may find a suitable solution in a move away from a high-cost city toward a more affordable mid-sized location.
To better understand this year’s challenges for sellers also looking to purchase their next home, we surveyed homeowners across the country in partnership with HarrisX. The data highlight That many of today’s seller-buyers are younger, and looking for a change due to growing households and a search for affordability.
Who are this Spring’s Seller-Buyers?
Of all the homeowners who plan to sell this year, 72% are also planning to buy their next one. The largest demographic group of seller-buyers active in this year’s markets are millennials (47%). Seller-buyers in the Gen Z cohort (25%) are the second largest group, followed by Gen X (15%) and Baby Boomers (12%).
Mirroring broader activity patterns, the largest shares of seller-buyers are located in the South and West regions of the country, comprising 69% of total. The Northeast and Midwest were each home to 15% of seller-buyers.
Similarly, most seller-buyers are concentrated in metropolitan areas, with 42% living in an urban setting and another 42% in a suburban location. Only 15% of sellers looking to buy live in a rural area.
What are Sellers’ Main Issues this Spring?
With higher prices and mortgage rates upping the financial challenges for many sellers who are looking to transfer the gains toward their new home, we asked homeowners how they plan to handle the transition. Forty-six percent of them plan to buy a home to move into first, and then list their current home for sale. This choice seems to offer the most flexibility for homeowners, especially given the tight inventory conditions, which have left many successful sellers in limbo after closing their homes and not able to find a replacement. At the same time, 44% of homeowners plan to sell and buy at the same time. Finally, one-in-ten homeowners plans to sell their property and live somewhere else while looking for a replacement.
With inflation pushing consumer prices higher by 8.5% compared with last year, home prices advancing at 14% above year-ago levels and mortgage rates driving the monthly payment 50% higher than in 2021, affordability is a central concern for this year’s homeowners planning to sell and buy. When we asked Americans at what price they were planning to sell their current home, 49% indicated $500,000 and below, with 15% of them aiming for $200,000 or less. The distribution of sale prices points to an encouraging sign for many buyers who found last year’s housing market highly frustrating due to escalating prices. An increase in the number of affordably-priced homes for sale would be welcome news for markets. Interestingly, 32% of homeowners plan to sell their homes in the trade-up range of $500,000 – $1,000,000, and 18% seek a sale price above the $1,000,000 mark.
Highlighting the affordability theme, this year’s sellers are looking to buy their next homes at more approachable price points, with 53% of them aiming for a property priced at $500,000 and below, and 17% of those seeking houses in the ‘$200,000 or lower’ price category. A slightly smaller share of sellers seeks trade-up homes (the $500,000 – $1,000,000 category)—29% compared with 32% planning to sell in the same segment.
The search for more affordable housing was further illustrated in a follow-up question, in which we asked homeowners planning to sell and buy what the new home had “less of” than their current home. A lower asking price and fewer upgrades were at the top of the list, followed by outdoor features, size, number of bedrooms, and acreage.
At the same time, seller-buyers are looking for more of certain features in their next homes. At the top, they want larger homes on bigger lots, a clear indication that today’s buyers expect more of their homes, especially as stage-of-life needs shift. Along with more space, seller-buyers are looking for more outdoor features in their next house. And not surprisingly, a noticeable share want more bedrooms and bathrooms.
How Are Market Conditions for Sellers This Spring?
Recognizing that market conditions remain tilted in their favor, a noticeable share of homeowners planning to sell this spring expect to dictate the terms of the transaction. Close to a third plan to ask for more than they think their house is worth, while 27% intend to ask for a quick close. Almost a quarter do not intend to accept offers below asking price, and 24% do not plan to pay for any repairs or improvements to their home.
In a sign that financial pressures and fast-changing interest rates are impacting housing markets, seller-buyers are concerned about managing the financial logistics of both transactions (36%), along with home prices (32%), and rising mortgage rates (24%). About a third of homeowners planning a sale and purchase are concerned about the logistics of moving during the process of vacating a home and taking possession of another. Other concerns are the final price of the home they are selling (27%), finding a home in their budget (26%), financial shifts (25%), and finding the right agent to work with (23%).
When navigating the fast-moving currents in today’s real estate markets, seller-buyers are considering several options to facilitate their transactions. At the top of the list, this subset of homeowners are looking for one agent to handle both transactions (37%). The second-highest ranked option is to work with an online company that makes instant cash offers. The third option is to buy a home with the help of a company that will let homeowners move in and pay a fee or rent until their home sells.
What are Sellers Looking for in their Next Homes?
Affordability is an important consideration for buyers in 2022, and that includes homeowners selling their current home and looking for their next one. With the experience of at least one home under their belt, we asked seller-buyers what are the most important features in their next homes.
Surprisingly, and likely reflecting pandemic-induced shifts in preferences, space for pets was ranked as the top feature. While pet ownership has been rising over the past decade, the quarantines and social distancing constraints accelerated the trend, which is now reflected in what people prioritize in their home searches. Coming in second place, seller-buyers want large backyards in their next homes, another aspect which has grown in importance over the past couple of years. Tied for third place were several features, which have been at the top of buyers’ lists for a few years: updated kitchens, outdoor living areas, quiet locations and garages. These features highlight the renewed value that Americans place on a home’s functionality.
The search for affordability, amenities and features have led to a reshuffling of location preferences. Following a decade of urban renewal, households are looking for different attributes. While 17% of seller-buyers are searching for their next home in the same neighborhood, 37% are looking at homes in other parts of their city. An additional 23% of these homeowners looking for their next home are searching in nearby cities and towns, and 13% are looking at other areas within the same state. Echoing other sources of migration patterns, 9% of seller-buyers are seeking their next home in locations across state lines.
We asked homeowners looking for their next place outside their current city what was motivating their move. Lower cost of housing was the primary motivator, followed by the desire for a warmer climate. The data spotlight the popularity of housing markets across the Sunbelt, which have seen an influx of new residents over the past two years, along with active and growing real estate markets. Having access to the outdoors and being closer to family and friends were also important reasons for considering a home in another city.
Why are Sellers Also Looking to Buy?
Homeowners planning to sell their current home while buying the next one listed several reasons for their decision. Topping the list was the fact that many people are experiencing growing households, whether moving in with a partner, having children, or caring for parents. Tied to this, seller-buyers need more space and their current home does not provide it. Another nearby reason was that these homeowners want to build equity.
While practical considerations serve as the foundation for changing homes, economic and market changes also play an important role in homeowners’ decisions. Given rising home prices and interest rates, it is not surprising that 63% of seller-buyers are concerned that they will be priced out of the market.
These concerns are leading some homeowners to second-guess their plan to buy a home after selling their current one. When we asked what market conditions are most pressing, 39% listed inflation at the top, 36% pointed to rising home prices and another 36% indicated rising gas prices. Rising interest rates were also concerning, as was the potential for another recession, along with the political landscape.
Even with existing concerns, 19% of sellers were already in the process of making offers on their next home. Another 11% were planning to buy in the next 30 days, while 26% were looking at the next 1-3 months. Altogether, 73% of sellers are planning to buy another home within the next 6 months.
Conclusion
This year’s housing markets remain hampered by insufficient supply which is compounded by the forces of rising inflation and mortgage rates. The silver lining to the overhanging affordability clouds is that a growing number of homeowners is planning to list their properties for sale, offering a reprieve from the inventory shortage. At the same time, many of these homeowners are working through the same challenges as other buyers, seeking affordable housing options amid a landscape of rising prices and financing costs.
Methodology
This report is based on data from a survey conducted online within the United States from April 15-18 among 3,212 adults by HarrisX. The sampling margin of error of this poll is plus or minus 1.7 percentage points. The results reflect a nationally representative sample of U.S. adults. Results were weighted for age by gender, region, race/ethnicity, and income where necessary to align them with their actual proportions in the population.