Collins: Why aren’t more homeowners selling?

February 24, 2022February 24, 2022

Collins: Why aren’t more homeowners selling?

Single-family homes in San Jose are pictured in this file photo.

Santa Clara County saw one of the hottest housing markets in a decade last year, but 2022 has started out with some of the lowest available inventory ever. This month, we will be taking a dive into the reasons that homeowners are not selling and why turning over housing stock is critical to maintaining vibrant neighborhoods.

There are several reasons why sellers are staying in their homes longer than ever before. The first one is probably the most obvious: if you sold your house tomorrow, where would you go and what could you afford?

The appreciation in value that homes have experienced is a double-edged sword. On one hand, you can sell your existing house for top dollar. On the other, unless you leave the area, you will be forced to compete with fellow homebuyers that are all-too-often making an offer above the listing price in the hopes of winning the bid for their next dream home in this highly competitive market. According to a recent survey from the California Association of Realtors, nearly one-third of all sellers are considering leaving California, altogether.

Fig 1. Table of location of seller’s new home, 2021 Annual Housing Market Survey, provided by California Association of Realtors.

Capital gains is another daunting hurdle to overcome. If you have lived in your home for several years, it is very likely that your house has appreciated significantly. You are responsible for the tax liability of the gains from your original purchase price.

Another barrier for sellers is the increased property taxes if they choose to move to a new home, especially if they stay in the area. We also have homeowners that have really fallen in love with the record low interest rates we experienced last year. We are expecting interest rates to rise significantly this year, even though they will be substantially less than historical averages.

In 2000, the typical homeowner moved every seven years. Today, homeowners stay in their property for an average of 11 years.

Why is that significant? For one, that means fewer available opportunities for first-time homebuyers. We also need to keep in mind how old our housing stock is, especially our single-family homes.

Most single-family homes were built over 50 years ago and require a tremendous investment to maintain due to wear and tear over the years. A significant amount of maintenance and upgrades usually occurs as the property is prepared for listing. Fresh paint and new landscaping is essential to providing that enticing curb appeal. And when a new family moves in, they also tend to make additional upgrades and enhancements as they personalize their new home.

This cycle of fixing up homes as sellers prepare to sell and new homeowners move in creates vibrant neighborhoods.

San José Spotlight columnist Neil Collins is CEO of the Santa Clara County Association of Realtors, a trade association representing more than 6,000 real estate professionals in Santa Clara County and surrounding areas. His column appears every fourth Thursday of the month. Contact Neil at [email protected] or follow @neilvcollins on Twitter.

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Comments (10)

CougarW Feb 24, 2022 at 11:48AM

Let me add something to this the people of Santa Clara County need to consider. Actually, the entire Bay Area. Global heating, and the expected dangerous changes in the global and regional climate stability, are all very real phenomena. The situation globally can only get worse over time, for decades if not centuries, and very shortly (starting now) parts of the planet will become slowly but increasingly uninhabitable. The poor people will die — as they always have in times of crisis, having no means of escape — but the rich will leave. Already are leaving, quietly, without fanfare. They will take their money and head for places where money talks, and where diversity and tolerance are celebrated. My guess is that there will be at least 500 million people on the move globally over the next 20 years, bringing cash with them, and at least half of those will come to the US. Mostly to the west coast, mostly to the greater Bay Area. That’s us, and that’s here. I did some quick math and I came up with at least 25 million added in the south Bay alone. Nor does this include internal movements from southern California and the US south, can add another 20 million there. Again, bringing billions of dollars in wealth transfer over 20 years. I know, that sounds absolutely insane. It’s not. It’s math. Now, with that as a backdrop, and given a 20-year time frame, what do you suppose that will do to property values and home sales for the entire west coast US? And if all those people are coming here, then what kind of fate awaits anyone on the west coast who — for whatever reason — takes the money and leaves? To go where? To live how? This is about a lot more than home sales or property values, this is about an existential crisis facing the entirety of humanity. But the wealthy have options, and if you think 100 million people coming to the Cali — and half that to the south Bay — is uniformly welcomed, then get ready for a shock. This is going to become ruinous. The role of State and local governance ought to be to anticipate this wave of immigration, as well as the impact of all that influx of wealth, and plan accordingly. They will eventually do this, but only at the eleventh-hour, and only in the face of absolute disaster.

[Full disclosure: I am a property owner in San Jose, I am NOT a nativist, I have complex feelings about this entire s**t-show, but I absolutely 100% accept the science on global heating and I expect immediate and massive dislocations globally. We are fortunate to live in one of the few places on Earth that will not be immediately devastated, and I contend we have a moral and ethical obligation to accept as many climate refugees as we possibly can. ]

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- Not Suckered Feb 24, 2022 at 7:09PM
  
  “Cali” or “the Cali” are not the name of California. No native says “Cali,” which is grating to natives and the most-established long-term transplants.
  
  There’s nothing like the migration level you would expect, as real anticipated warming and drying, which will take decades, not just a few years as you indicate by your behavior, will simply make the worse things about the climate now, even more bad. It also promises the potential for frost-free living in some parts of the Bay Area, an example of an improvement even on the West Coast, which like the rest of the West stands to lose overall from warming and drying, which again is a decades-long process. It has been known since the 1970s and never has been an excuse for hysteria, hyperbole, irrationality, or variously deranged leftist politics in place of the actual facts and science.
  
  The cities run on imported or moved water already; they’ll need more later. That’s the main problem related to environment along almost all the West Coast. (Some of the littoral Northwest is more complicated, as you should already know.) Every place that’s dry now will get drier, in addition to dry lands expanding east 100-200 miles as well as north a bit. That is not apocalypse.
  
  Many avoid coming to California now or leave it because they know it has become markedly worse as well as much more expensive, particularly with housing. Those with more tolerance, lower standards and taste, and the enamored or desperate to park their money from overseas will continue to come along with those who can afford still to live decently.
  
  More population and greater density are sought by not only activists (useful idiots for the others) but by developers and politicians to meet the needs of those who do come and to add to the Democrat voter numbers.
  
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- Myke Feb 25, 2022 at 10:40AM
  
  First, ‘Cali’ isn’t a word that native Californian’s use.
  Second, 25 million more to the bay area? It took 45 years to double our population. I doubt your math is correct.
  Third, California has become an unsustainable state. Remember, we lost a house seat.
  Fourth, building homes for 25 million more people just won’t happen.
  
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not him Feb 24, 2022 at 12:42PM

Capital Gain exception is pegged out, and why sell when you are making 10% forever because you progs can’t build a tree house.

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- Not Suckered Feb 24, 2022 at 7:10PM
  
  There’s also the case of many who are still in a halfway okay place, not yet found or as easily reached by the criminals, in a good kind of situation, and like it or otherwise are reluctant to move.
  
  There is no obligation of long-time homeowners to sell and move.
  
  (Nor to sacrifice their property or their neighborhood for politics.)
  
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  - not him Feb 25, 2022 at 7:44AM
    
    I think the author trickly points to the fact that sellers plan to move out of the state but not much info on how many actually are moving. Obviously, given the inventory there are not many sellers. And why would you, unless you were adamantly opposed to the education regime currently offered to your kids?
    
    Silicon Valley has terrific weather, drivable skiing, drivable ocean, drivable redwood hikes, drivable epic mountain biking, still some good restaurants (of every flavor) and skillfully sequesters much of the poor and homeless into eastern ghettos and a vacant SJ downtown. On top of that, prices seem to rise without bounds as China, Europe, etc. slip into some real nonsense, California (and the dollar) is a very welcoming place if you’ve got fat stacks of cash, high value skills, or are willing to grind your life away and pay high rent. The $500K per couple limit on cap gain exemption is pretty much the nail in the coffin, perhaps a one-time $2M exemption or something like that may jostle a few homes free.
    
    All of this still isn’t making a middle-class/blue collar mecca or a bastion of progressive pride, more like a highly conservative Elysium for elites and their wage/rent serfs. So not a bad place to keep a vacant or seasonal house, probably best to avoid renting it out, but not a place to raise a family or improve the community out of necessity, you know like living?
    
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Not Suckered Feb 24, 2022 at 7:12PM

There’s also the case of many who are still in a halfway okay place, not yet found or as easily reached by the criminals, in a good kind of situation, and like it or otherwise are reluctant to move.

There is no obligation of long-time homeowners to sell and move.

(Nor to sacrifice their property or their neighborhood for politics.)

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Jimmie Joe Feb 24, 2022 at 10:54PM

Why move when even a lateral move to a larger home on the next block will triple your property taxes? In our case, we wanted to sell our home (that we purchased for $450k) for $1.1m and buy a slightly larger home two blocks away that was $1.2m. We didn’t because our prop tax would go up from $7000/year to almost $20k/year. No thanks. We stayed and will move when one of us turn 55.

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hoapres Feb 25, 2022 at 7:18AM

Because they don’t have to. That sounds like a simplistic answer but sometimes life is simple. Let’s say you have a close to if not paid off house. Buy a house somewhere else using the equity in your current house and rent your SV house out.

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Carlos Ezquerro Feb 25, 2022 at 10:16AM

Silicon Valley home prices have been gettin up, since the 1940s.
The market haven’t seen this market before, which is unprecedented now and since nine years ago.
Starting with the COVID market and its limited supply has been creating people to move to a place out of this area, since they can work at home, away from the office. The stimulus package of 33 trillion dollars have helped business owners to make the move.
Family is first and if you like most people, who are empty nesters and considering to move out of the state.
People who purchased their home 11 years ago are selling their homes to other states, with lower pricing on homes for sale.

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Collins: Why aren’t more homeowners selling?

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