The median tenure in a home from 2000-2008 was six years. From 2009 to 2013 the number has incrementally increased to its present figure, a median of nine years.
There has been much discussion about the reasons why tenure has increased. It is a multifaceted issue:
• There are still underwater home sellers
• The lock in rate of first-time buyers being able to skip the starter home and jump right into their trade-up/family home
• The lock in rate of low mortgages
I’d like to address the first two issues with time series data from the annual Profile of Home Buyers and Sellers report. This year in the profile sellers were asked if they wanted to sell earlier but waited or stalled because their home was worth less than their mortgage—13 percent of recent sellers (who went on to purchase another home) were in this situation. This was most common among those who bought their home six to 10 years ago—about one in five sellers were in this situation. Those sellers who sold at that nine-year mark could have really wanted to sell after six years.
As home prices dropped, interest rates hit record lows, and housing affordability hit record levels, buyers were able to buy more home than they could in the past. This phenomenon increased the expected tenure in home. First-time buyers were buying homes that were 1,516 square feet in 2006 – this figure jumped to 1,670 square feet in 2013. Their desire to move sooner also decreased. The expected tenure in home for first-time buyers in 2006 was just six years in the home – in 2013, the expected tenure in home increased to 10 years. The difference of only 154 square feet could be the difference in having a room for a den that could transform into a room for a child in the future, making the need and desire to move less certain and pushing the idea farther into the future. Interestingly, over the same time period the age of first-time home buyers did not change, staying within a range of 30 to 32 years old.
It will be interesting to see in coming years if tenure in home stays at nine years, and a new normal is created, or if tenure will go back to the historical median of six years.
Specialist in the Art of Real Estate Sales and Finance
Ron Henderson GRI, RECS, CIAS
Multi Real Estate Services, Inc
Gov’t Affairs Chair – California Association of Mortgage Professionals