Homeowners Are Staying in Their Homes Longer

by Michelle L. Anderson, MBA, January 29, 2020

The low housing inventory has been driving up home prices and creating a seller’s market. In December 2019, the inventory in Pinellas County dipped to a supply of 2.3 months – way short of a balanced market of 5.5 months. We are talking supply and demand here.

Supply of Housing Inventory

Source – Florida Realtors

 

One reason for the low inventory is that homeowners are staying in their homes longer than they did previously. Reasons may include longer lifespans and changing lifestyles of the baby boomer generation, homeowners wanting to capitalize on a rising market or changes in consumer’s mentality following the past housing bust of 2007-2008. From 2001 – 2008, Americans held their homes for an average of only 6 years. According to an article in the Wall Street Journal*, “More homeowners staying put has helped cause housing inventory to dwindle to its lowest level in decades, which has also helped push up prices on homes for sale. Adjusted for population, the inventory of homes for sale is now near the lowest level in 37 years of record-keeping.”

The good news is that we may be seeing a shift. In 2018, the nationwide average was 13 years, which shifted down to 10 years in 2019*. In Florida, the rate is lower – 8 years. Florida homeowners likely hold homes for a shorter period because they are bought as 2nd homes, bought later in life, or are purchased by those who come from other states and later decide to return to their state of origin.

Conventional thought has been that a homeowner should hold their home on average at least 5 years to break even. This number fluctuates with the market. Currently in St. Pete, the average break-even point is at 3 years. From this perspective, I think it bodes well for the financial health of Americans that they are staying in their homes longer. If in homeowner doesn’t hold their home up to the break-even point, they may have actually been better off renting. To calculate break-even points by area, down-payment and home price, this online calculator can be used.

Housing Inventory Turnover
Another way to analyze housing inventory trends is to calculate the inventory turnover rate. This rate can be useful when comparing neighborhoods within an area and what the expectation for new homes coming on the market may be. It is a way to determine if a neighborhood’s residents tend to stay put.

The neighborhood turnover rate is the percentage of homes in a neighborhood that sell each year. The rate is calculated by dividing the total number of homes in a neighborhood by the total number of homes that sold in that year. I calculated the turnover rates for a few St. Pete Neighborhoods:

Central Oak Park – 12% (of 1,727 homes on North Streets)
Historic Kenwood – 8.3% (of 814 homes)
Historic Old Northeast – 8.3% (of 534 homes)
Broadwater – 21% (of 378 homes)
Old Southeast – 16% – of 247 homes

Want to stay connected with my Blog Posts? Subscribe here.

*National Association of Realtors, How Long Do Homeowners Stay in Their Homes, Jan. 8, 2020
*Wall Street Journal, “People Are Staying in Their Homes Longer—a Big Reason for Slower Sales,” Nov. 3, 2019

Posted on January 29, 2020 at 10:02 pm
Michelle L. Anderson | Category: Home Buying, Home Ownership, Real Estate Market, Selling Your Home | Tagged , ,

Leave a Reply

Your email address will not be published. Required fields are marked *