A new survey from online real estate brokerage Redfin regarding home buyer sentiment found that existing owners are a lot more likely to sell before purchasing a new home.
In fact, the percentage of survey participants who said they would sell before buying again nearly doubled from a year ago.
Some 44% of current owners said they’d sell first, up from 23% a year ago. That made it the top response in the survey, with “buy, then sell” a distant second with a 21% share.
Even fewer (15%) said they’d rent out their current residence in order to buy a new home, down from 30% a year earlier. Guess fewer folks want to be landlords.
And another 20% indicated “other,” whatever that means.
This seems to be directly related to the intense competition found in today’s real estate market.
Essentially, these homeowners know that it will likely be impossible to get an offer accepted that is contingent on their existing home selling.
After all, if there are plenty of other willing buyers, why would a seller want to take on the risk of another home selling before theirs does?
There’s no need with inventory so low and demand so high, so I suppose it makes sense to sell first and then arrange some kind of temporary living situation. Or gasp, rent!
Once an owner sells, they’ve also got plenty of cash in their pocket (hopefully) to throw around their weight if need be, pushing the low-down payment buyers out of the way.
It’s also not a bad time to sell, given how expensive home prices have become just a handful of years after one of the worst housing crises in history.
Home Buyer Concerns Have Also Shifted
Speaking of prices, they happen to be the biggest concern for would-be home buyers today.
A year ago, they were the second biggest concern, but they’ve since claimed the top spot. As I said, home prices have been on a tear, which would explain the deep concern.
Increasing competition from other buyers also moved up one slot from third to second, while inventory concerns dipped from first to third.
New is the top five is selling the current home, which we’ve already talked about.
Rounding out the top five is down payment concerns, seeing that rents are high and a higher-than-necessary down payment might be needed to win the bid.
When moves were made to push down mortgage rates, the intention was to prop up home prices and help underwater borrowers stay in their homes.
But the obvious problem is that it makes it more difficult to save enough money for a down payment when the price is higher, and once interest rates normalize, it’s a one-two punch.
Interestingly, there isn’t really a correlation between interest rates and home prices, so it’s unclear if higher rates will force prices down from their current lofty levels.
However, 44% of respondents in the survey think prices will either remain flat or fall over the next six months, up from 29% a year ago.
So we could be starting to top out, as many long expected.