By daren Blomquist
VICE PRESIDENT, REALT Y TRAC
LengTh of ownership maTTers for The marke T recovery
One of the biggest wildcards for the 2014 housing market is how potential move-up buyers will behave, and their behavior may boil down,
in large part, to how long they have owned their homes.
This past year, the market bounced back strongly, partly on the backs of institutional investors — larger investors backed by hedge funds and private equity
that accounted for about 7 percent of all residential sales in 2013 — and other
cash buyers, who collectively accounted for about 29 percent of all residential
sales in 2013. That number spiked to about 40 percent in the last two months
of the year.
The momentum achieved by the housing market this past year is good news,
but move-up buyers, along with first-time buyers, will need to become more
active participants for that momentum to continue this year. although home
prices recently dropped 30 percent to 60 percent in many markets, the challenge facing many first-time buyers is the lack of affordability, at least in some
of the markets with the most rapidly rising home prices.
The issue of affordability needs to be addressed separately, but this particular
column will look at the major challenge facing potential move-up buyers: equity, or lack thereof. This issue not only impacts homeowners who might otherwise move up by selling their homes and buying other homes; it also impacts
those homeowners who are staying put but want to refinance to remodel or for
Digging into the data of realty Trac’s December 2013 U.S. home Equity & Underwater report, it is apparent that the length of ownership is a major factor in a
homeowner’s equity situation. although that may not be surprising, segmenting
homeowners by number of years owned helps to identify how many potential
move-up buyers will become active this year, and how many will likely wait longer before becoming active.
It’s beneficial to simply look at the breakdown of total owners by years
owned. We broke this into six segments illustrated in the accompanying pie
chart: less than one year; one to five years; five to 10 years; 10 to 15 years;
15 to 20 years; and more than 20 years. The biggest single segment is homeowners who have owned their homes for five to 10 years, accounting for
30 percent of all homeowners.
This segment of homeowners is also the only one where the average loan to
value (LTV) is higher than 100 percent, meaning the average homeowner in
this category has negative equity. It’s important to note that the average LTV
includes homeowners who have paid off their homes and have no outstanding
This segment of homeowners who have owned home for periods that range
between five and 10 years is clearly the bottleneck in today’s housing recovery,
given that the average time that sellers have stayed in their home before selling now stands at nine years, an increase from six years in the booming years
between 2003 and 2008, according to the National association of realtors.
In other words, the homeowners most likely to become move-up buyers based
on time in the home are exactly the same homeowners who are least able to
become move-up buyers based on equity.
The segment of homeowners who have owned their homes for periods that
range between five and 10 years represent the only segment with average negative equity. all segments representing homeowners who have owned 15 years
or less have average LTV ratios that give homeowners enough equity to come
out ahead from a sale, typically at least 20 percent, however.
Only two segments — 15 to 20 years, and more than 20 years — showed homeowners with at least 20 percent equity on average.
These two segments of homeowners represent the best potential move-up buyers this year, but combined they still only account for one
in every four homes owned.
The breakdown of homeownership per years owned varies greatly from market to market. The markets with the biggest percentage of
homeowners in the above-15-year segments represent those markets with the best chance of seeing strong move-up buyer activity this
year, while those with the lowest percentage of homeowners in the above-15-year segments represent those with the worst chance of
seeing strong move-up buyer activity this year.
Daren Blomquist is vice president at realty Trac. With realty Trac since 2001, he is the company’s primary media spokesperson and expert on foreclosure statistics
and trends. Blomquist is managing editor of the Foreclosure News report and creates foreclosure market and sales reports cited by thousands of media outlets.
he interfaces with the Federal reserve, U.S. Senate Joint Economic committee and Banking committee, U.S. Treasury Department, and numerous state housing
and banking departments. reach him at email@example.com.
Scotsman Guide Residential Edition | scotsmanguide.com | March 2014
hoMeo WneRShip By yeaRS o Wned
Source: realty Trac
15% >0 & <=1
>1 & <= 5
> 5 & <= 10
> 10 & <= 15
> 15 & <=20
MaRke TS Wi Th MoST LonG-TenuRed hoMeo WneRS
homeowners owning 15+ years
Source: realty Trac
eQui Ty By yeaRS o Wned
average of loan to value
Source: realty Trac