Home Sellers Have Great Expectations In A Hot Housing Market

Spring is in the air and home buyers and sellers are coming out of hibernation. New survey data by Realtor.com shows that homeowners are gearing up to sell this spring and summer. According to the report, 64% of prospective 2022 sellers anticipate doing so within the next six months and with high expectations for making a profit.

Still, the potential uptick in newly-listed homes indicates some much-needed relief could be on the horizon for buyers – especially first-timers. Today’s sellers expect to ask for relatively affordable prices and include a higher share of Millennials than last spring, suggesting that more Americans plan to upgrade from their starter homes.

“The start of the spring 2022 real estate season comes on the heels of a historic pandemic-defined period, which saw Americans respond to health concerns and government-induced quarantines by seeking shelter in homes,” said George Ratiu, senior economist and manager of economic research at Realtor.com.

He explained that monetary policy injected an unprecedented dose of financial liquidity into capital markets, leading to record-breaking low mortgage rates in 2021.

Ratiu said, “In the process, housing markets—already struggling with over a decade of under-building—responded with double-digit price increases, which continued from last year into March 2022, with the median-priced home reaching $405,000. Moreover, in a market heavily skewed in sellers’ favor, homeowners have been able to be picky with competing offers, each one waiving contingencies and concessions in order to stand out, with winners generally bringing a full cash offer to the closing table.”

The survey of 3,000 consumers, which was conducted online in February, also asked about the experiences of recent sellers, who said determining the right time to list was the longest stage of the process.

“Our survey data illustrates the importance of helping empower homeowners to take control of the listing process, by providing information about market conditions, prices and seasonal trends, like the best dates to list your home,” said Ratiu. “While sellers are expected to hold the upper hand in 2022, navigating the listing process remains a challenge – particularly for those also buying in today’s fast-paced market.”

Ratiu said homeowners who are ready to move forward with pandemic-delayed plans will find plenty of opportunity this spring and summer.

“Although accelerating inflation is leading to higher housing costs and living expenses, many buyers remain interested in finding a home,” he explained. “At the same time, recent housing trends suggest demand is beginning to moderate as higher mortgage rates push monthly payments out of some buyers’ budgets, underscoring the long-term need for more affordable inventory.”

Survey data suggests some relief is on the horizon for Americans grappling with one of the worst housing shortages of all-time. Almost two-thirds (64%) of prospective 2022 sellers anticipate listing a home within the next six months.

Whether these sellers follow through with their plans will be key to the forecasted 2022 inventory recovery and critical for buyers hoping to find a home before mortgage rates climb even further. In a positive sign that homeowners are serious about listing, many sellers are already getting their homes ready. However, they are doing so with great expectations of the current market, which means buyers should prepare for sellers asking for high offer prices, quick closes, waived contingencies and more.

• The majority of 2022 prospective sellers plan to list within the next six months, with 9% already listed and the remaining getting ready to list within the next 30 days (11%), one to three months (24%) or four to six months (20%).
• Compared to those who planned to list last spring, this year’s prospective sellers have higher expectations of the hot housing market, including asking for more than their home is worth (42% versus 29%) and refusing to pay for repairs or improvements (28% versus 24%).
• When asked why they are planning to list in 2022, surveyed sellers’ top reason was wanting to profit off the current market, tied with their home no longer meeting their families needs (each at 31%).
• Homeowners’ motivating factors behind moving also reflect the impact of pandemic trends, such as wanting different features after spending so much time at home (15%) and no longer needing to live near their office (14%).

With the oldest Millennials already 40 years old, these homeowners are playing an important role in adding to the supply of starter homes. Millennials represent nearly half (49%) of sellers who plan to list within the next six months, and many anticipate selling at relatively affordable prices. This is welcome news for first-time buyers, who face fierce competition for limited available starter homes. Combined with rising affordability issues as home prices and mortgage rates climb, survey data offers some hope for first-time buyers, based on:

• More Millennials plan to list within the next six months than in March 2021 (75% versus 66%), and account for a higher share of all 2022 prospective sellers (42% versus 26%).
• In a further sign that older Millennials are moving on up from their starter homes, the share of surveyed Millennials who have sold a home before was nearly as high as the overall rate (61% versus 64%).
• Millennials have plenty of financial motivation to stick to their plans, with top reasons for selling reflecting the pressures of rising inflation and economic uncertainties. Compared to all survey respondents, higher shares of Gen Y sellers want a more affordable home (34% versus 21%) and need the sale money as soon as possible (14% versus 11%).
• In a potential sign of more starter homes coming onto the market, the majority of 2022 prospective sellers expect to list in relatively affordable price ranges: $350,000 or less (43%) and $351,000 to $500,000 (22%).

The Covid housing market has largely favored sellers, and many who recently sold were able to take advantage of bidding wars, fast closings, waived contingencies, inspections, appraisals and more.

At the same time, sellers’ experiences highlight the importance of preparation, especially as buyer demand is beginning to moderate. Even among recent sellers who found success, the majority took steps to get their home ready to list, such as making repairs, cleaning and decluttering. Although many sellers were able to list quickly, 41% said the process took longer than they anticipated.

• Over half (53%) of sellers spent less than a month preparing their home for listing, while another 26% said the process took one to three months.
• Forty-one percent of recent sellers said getting their home ready to list took longer than they expected. Determining the right time to enter the market took longer than any step of the home prep process, with 38% of respondents reporting that this decision took more than three months.
• Among steps successful sellers took to prepare their home for listing, top responses included repairs and updates (59%) and cleaning and decluttering (67%). While minor cosmetic updates were the top repairs sellers made before listing, at 53% of respondents, nearly as many fully repainted interiors and replaced flooring (47% each).

The majority (80%) of recent sellers sold at or above their asking price. Other top benefits of the competitive market included: buyers forgoing repair concessions (28%), offers within a week (27%) and waived contingencies such as inspections (25%).