We have become a more stagnant nation. This could allude to many different topics, but since I specialize in real estate, this statement has to do with the number of people who move each year. According to the Pew Research Center, just 11.9% of Americans changed residences between 2007 and 2008. That number is expected to be even lower this year. These are the lowest numbers percentage since the government began keeping track in the late 1940’s.
The sales numbers echo this data. Real estate sales in my local market, Boulder Colorado, were down 15% during 2008 and down another 17% through November of 2009. The data is relevant, but the more important discussion surrounds why sales are down and what we might expect in the future.
First let’s look at why sales are down. The main reasons for the recent decline in sales have been well documented; poor economy, lack of credit and unemployment, all leading to a historic lack in consumer confidence. According to a Pew Research study earlier this year 79% of American Households considered this a bad time to sell a house. Of those same respondents, 65% thought that this was a good time to buy. When you can’t buy until you sell and you think it is a lousy time to sell, the only rational thing to do is to not do either and that is exactly what people have done.
Now let’s look at prospects for the future. I am not a soothsayer or a prophet but the spike in the those changing residences in 1985 – 1986 intrigued me. What was the cause of that spike and what can we learn from it? The early 1980’s were also a tough time to buy or sell a home. Interest rates were sky high (see attached chart) and people just couldn’t afford or justify a 17% loan. If there was a survey at that time asking if it was a good time to buy or sell, the answers would have been very pessimistic. When the interest rates came back down to earth in late 1985 and 1986 there was a spike in the percentage of people changing residences. The change in interest rates seemed to release a surge of pent up movers.
Can we expect the same scenario? There are many factors that are causing the sales slowdown and as each is corrected (yes I’m optimistic), I believe that suppressed buyers and sellers will come out of the woodwork and cause a spike in activity, not unlike what we saw in 1985 -1986. People have not had a reason to move. Many would argue that there have been many reasons not to move. But as those reasons fade away more and more will make up for lost time and move to that bigger, smaller, closer, more remote home.