The U.S. housing market is headed into a pivotal spring season as home sellers wait for their sweet spot, according to Opendoor
The last few years have seen a wave of ups and downs for homebuyers and sellers–from homeowners who rode to the height of the sellers' market during the pandemic to buyers who contended with the most historic market shift in 40 years. Coming into the traditionally busy spring selling season, it seems almost impossible to predict but there are early indications that 2024 could be the year of the “seller sweet spot.”
Since 2021, Opendoor has conducted quarterly surveys of over 4,000 prospective home sellers. Year-over-year quarterly tracking (beginning in March 2022) shows relatively little change in the number of sellers who were planning to sell within the year. We even saw a slight decrease in Q2.
However, in our December 2023 survey, we saw a substantial 18% increase in the number of homeowners ready to sell in the next 12 months–a higher proportion than we’ve seen in any quarter. We believe this big uptick in sentiment is a byproduct of two factors happening simultaneously: an eagerness to get back into the market and pent-up demand.
Will April showers bring more houses?
The real estate industry marks the Super Bowl as the official kickoff to the selling season, but data shows that sellers are actually more active a couple of months later, from April to June. This year we’re seeing that sellers may be coming off the sidelines even earlier: From 2022 to 2023, there’s a notable 7% increase in sellers who plan to sell in Q1.
Of course, there are multiple factors that go into picking the right time to sell. Some of the most obvious are: interest rates, housing affordability, and availability. What if just one of those big selling factors shifted to a more favorable condition? Our survey finds there’s an opportunity for a bigger shift in seller sentiment, too.
For the third time at the end of last year, the Federal Reserve maintained interest rates and signaled the potential for a rate cut in 2024. Simultaneously, the 30-year fixed-rate peaked in October 2023 at 7.9% followed by a steady decline every week thereafter. We believe that as homeowners watched both rate indicators, seller sentiment started to rebound.
The seller's sweet spot
What needs to happen in order for homeowners to run, not walk to the selling starting line? Here are a few scenarios where if one or all were to occur, 2024 could truly be a seller’s sweet spot.
A decrease and/or stabilization of interest rates gives buyers and sellers more market certainty. We noted earlier that we’re already beginning to see sellers come off the sidelines as rates stabilized and then slightly decreased at the end of 2023. A recent survey we commissioned with Harris Poll supports that data: 50% of respondents say an interest rate of 6.5% or less would prompt them to look to buy a home.
Continuation of new home builder incentives so there’s motivation for homeowners to purchase a new-construction home and sell their current one. One of the key drivers of affordability is availability. Underbuilding has been problematic for decades; the U.S. is short ~3.8 million units. However, 2023 was a new year for new-build homes as sales increased 4.4% in December 2023 vs. 2022. This is due in part to the creative incentives builders are able to offer like rate buydowns, extended rate locks, and discounted closing costs. These incentives brought the average price of newly built homes down ~16% from October 2022 to October 2023.
Increased or flattening of already-high rental rates that entice would-be-renters to move into the could-be-buyers category. Rental housing affordability is the “worst on record” according to Harvard’s Joint Center on Housing Studies recent report. While rates are slowing, the Harvard study notes that in 2022, rates were deemed unaffordable for 22.4 million renters–an all-time high. With renters making up ~36% of the nation’s housing market, only a fraction of those would need to be fed up with soaring rental rates to become buyers and give sellers more options.
Initial impact of the “Silver Tsunami” is felt. Some~80% of adults over age 50 are homeowners, and now boomers have surpassed Millennials to become the largest generation of home buyers. With the youngest Boomers beginning to retire, there’s an opportunity for significant growth in sellers beginning this year. These are sellers who may want to simple-size their life by downsizing or moving closer to family. The full effects of this tsunami are just emerging and could have a large impact.
The 2024 selling season has the potential to break new ground. What remains to be seen is whether the selling sweet spot will align with lower mortgage rates, an influx of renters, silver tsunami movers, or more new-build incentives.
Nick Boniakowski is the head of agent partnerships at Opendoor, where he oversees program strategy, growth, and sales enablement to help the agent community serve more customers and scale their businesses through collaboration with Opendoor. As a third-generation broker, he has extensive experience working with buyers and sellers, and now helps advise agents on how to meet their evolving needs. Prior to Opendoor, Nick served in leadership positions at Anywhere Real Estate Inc. and Redfin Corporation.
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