The median tenure homeowners plan to stay in their homes soared with the housing recession in 2008 for good reasons. Millions of owners were underwater and millions more lacked the 20 percent equity need to sell their home. Many facing the need to move for job or space reasons found it easier to move and keep their old home to rent out. Thus was born the phenomenon of “accidental landlording”.
The housing economy has changed dramatically. Values have almost regained their peaks at the top of the housing boom, far above the levels of 2008. Yet owner tenure has not changed and repeat buyers’ expectations today are twice as long as actual tenure ten years ago. Are longer tenures now locked in stone?
One of the leading motivations to move—change in employment—is also changing. Workers stick with the same job longer today than they did 10, 20, and 30 years ago. U.S. workers had an average job tenure of 4.6 years in 2012, the last year for which figures are available—that’s up from 3.7 years in 2002 and 3.5 in 1983, according to the Bureau of Labor Statistics. The trend holds up within almost every age and gender category—so it cannot be explained away by women’s increased presence in the workplace, or people working past traditional retirement age.
Another contributing factor could be the popularity of “aging in place” among the Boomer generation. More and more elderly are staying in their family homes rather than downsizing, or moving to retirement communities or rentals. According to AARP, 87 percent of adults age 65 plus want to stay in their current home and community as they age. Among people age 50 to 64, 71 percent of people want to age in place.
The Recession Changed Ownership Patterns
According to a new analysis by economists at the National Association of Realtors, in 1985, the median tenure for sellers remaining in their home was five years, the lowest in since NAR started tracking the data in the 30-year period. From 1987 to 2008, the median tenure for sellers was a steady six years throughout the course of about a 20-year period. The only exception was in 1997 when the median tenure jumped up one year to seven years for sellers.
As the U.S. housing market entered the recession, the median tenure for sellers began to rise—seven years in 2009, eight in 2010, and to nine years in 2011 where it has remained steady through 2015. The only exception is in 2014 when the median tenure for sellers reached an all-time high at 10 years, but came back down to nine last year. Thus market changes in the last decade have caused sellers to remain in their homes longer, increasing the median number of years in the home by 50 percent more than they did 20-30 years prior.
In 2006, first-time buyers reported that their median expected tenure was just six years and nine years for repeat buyers, the lowest since we started collecting the data for both buyer types. For repeat buyers, that bumped up to 10 years in 2007, 12 years in 2009, and then up to 15 years in 2010 where it has remained steady for the past six years. For first-time buyers, the median expected tenure in the home jumped to 10 years in 2008 where it has remained ever since.
It is no surprise that repeat buyers expect to remain in their home longer than first-time buyers. It is interesting, however, to see that first-time buyers in 2006 expected to sell in just six years. Fast forward a decade to 2015 and first-time buyers expect to sell in almost double the amount of time.
Economic Implications of Longer Tenure
Significantly longer ownership tenure means that homes will change hands less frequently, which hasmajor economic implications:
- Volumes of transactions will fall for real estate brokers and lenders. The coming of age of the Millennial generation could theoretically offset the effects of longer tenure except that the first symptom of extended tenure could be the chronic shortage of inventories over the last two years that has plagued home sales and limited opportunities for Millennials to buy;
- Demand for remodeling and renovation will increase as owners choose to fix up their current homes rather than sell them. Increased home repair will create new business for Home Depot and hardware stores;
- Business will decline for moving related services: moving and storage and relocation services;
- Owners who stayed put over the past decade will realize the benefits of regaining the equity they lost, which will make their retirement years more comfortable.