A move-up buyer is a homeowner who decides to sell their current home and purchase a new one that is typically larger, more expensive, or better suited to their changing needs and preferences. This could be due to factors such as an increase in family size, financial growth, a desire for a better location, or an upgrade in lifestyle. Move-up buyers contribute to the real estate market's activity as they simultaneously create demand for new homes and supply by listing their existing homes for sale. Where did they all go?
The spring season, a crucial time for the housing market, has arrived, but there is a noticeable lack of homes being listed for sale. In April 2023, only 392,016 homes were listed for sale in the U.S., significantly below the 497,844 listed in April 2022 and the 552,082 listed in April 2019. This phenomenon can be described as homeowners "quiet quitting" the housing market, with a marked decline in move-up selling and buying activity.
The primary reason for this decline is the spike in mortgage rates, which has made it economically unwise for homeowners with low mortgage rates to sell their homes and buy new ones at higher rates. This would result in substantially larger monthly mortgage payments, causing many potential move-up buyers to stay put and contributing to fewer homes entering the market.
The absence of move-up sellers and buyers not only affects the supply side of the market but also impacts demand. When homeowners decide to hold off on trading up properties, there is one less home being listed for sale and one less buyer entering the market. This leads to the question of whether buyers or sellers currently have the upper hand.
To gauge the balance of power in the market at any given time, it is more effective to examine the active listing total (total inventory on the market) rather than the new listing total (the number of homes listed for sale in a given month). While April 2023 saw a 21.2% decrease in new listings compared to the same month a year earlier, there were 49.3% more active listings in April 2023 than in April 2022. This increase in inventory can be attributed to homes sitting on the market for longer periods due to last year's mortgage rate spike, leading to a buildup of inventory despite fewer homes being listed for sale.
However, the national housing market is still far from being a buyers' market. In fact, active listings in April 2023 were 50.3% below the levels seen in April 2019. A market with inventory above pre-pandemic levels would indicate a significant shift in favor of buyers, while markets with inventory levels well below pre-pandemic levels have experienced less dramatic shifts.
Data for the nation's 100 largest housing markets reveals that only one market, the Austin housing market, has returned to pre-pandemic inventory levels. The other 99 major markets still have inventory levels below those of April 2019, including locations such as Hartford, Connecticut (down 79.7%) and Bridgeport, Connecticut (down 77.6%).
This decline in move-up buying activity has led to a stagnant housing market, with fewer homes being listed for sale and a shift in the balance of power between buyers and sellers. As mortgage rates continue to impact the market, it remains to be seen how this trend will evolve and what its long-term implications will be for the U.S. housing market.