The number of homes on the market has steadily crept up in recent months, following two straight years which saw stock levels plunge to ever deeper depths. Some towns started the year with just a handful of homes on the market. But by November, stock levels were up 26% on the same time last year, so what’s behind this increase?
Perhaps paradoxically, there are few signs that lots more homes are coming onto the market. New instructions are still broadly tracking 2021 levels. Sellers coming onto the market today are increasingly dominated by those who haven't moved for a relatively long time, often 25 years or more. While homeowners who bought much more recently have tended to stay put.
Instead it’s the average time to agree a sale which has pushed up stock levels. The average time to sell a home has risen by around 15 days (or 45%) on the same time last year, although it still sits below 2019 levels. In particular, there have been some big increases in the time to agree a sale between £500k-£1m, with rising interest rates hitting would-be buyers with big mortgages across parts of London and the South East.
All this means that if the same number of homes come onto the market, but each one takes twice as long to sell, the total number of homes for sale will double. And this is essentially what’s happened. Our analysis shows that 95% of the increase in stock levels can be put down to increased time on the market, with just 5% coming from additional homes being put up for sale.
Any further increase in the time taken to sell a home is likely to put further upward pressure on stock levels. A return to 2019 times to agree a deal, would see the current 26% increase in stock levels translated into a 37% rise, even with the same number of homes coming onto the market. While a return to the time it took to sell a home in 2012 would see stock levels come close to doubling.
Given the immediate economic outlook, we are unlikely to see a significant uplift in the numbers of homes coming onto the market. For the majority of people, it’s typically cheaper to stay put in a house that’s 90% right, than it is to make the move to somewhere which ticks every box. As such, 2023 is likely to be dominated disproportionately by essential moves, driven by the three D’s – debt, divorce and death.
The 2008 downturn saw stock levels rise on the back of the increasing time it took to find a buyer, coupled with some financially distressed buyers coming onto the market. But the shape of any slowdown next year is likely to look very different, with nearly a decades worth of stress testing preparing buyers to face a higher interest rate environment. With the number of would-be sellers firmly in line with recent times, it will serve to cushion house prices during the transition to a higher interest rate environment.
