Roughly 14 of every 1,000 U.S. homes changed hands during the first six months of 2023, according to a new report from Redfin.
That’s down from 19 of every 1,000 during the same period of 2019 and the lowest turnover rate in at least a decade.
In 2018, Freddie Mac estimated that about 2.5 million more homes needed to be built to meet demand, with the shortfall mainly due to a lack of construction of single-family homes. The homebuying boom of late 2020 and 2021, driven by record-low mortgage rates, remote work and a surge in investor purchases, depleted already low inventory levels.
Finally, 2022's soaring mortgage rates—average rates nearly doubled from January to June—exacerbated the shortage by handcuffing homeowners to their comparatively low rates, Redfin said.
“The quick increase in mortgage rates created an uphill battle for many Americans who want to buy a home by locking up inventory and making the homes that do hit the market too expensive. The typical home is selling for about 40 percent more than before the pandemic,” Redfin Deputy Chief Economist Taylor Marr said in a release. “Mortgage rates dropping closer to 5 percent would make the biggest dent in the affordability crisis by freeing up some inventory and bringing monthly payments down. But there are a few other things that would boost turnover and help make homes more affordable. Building more housing is imperative, and federal and local governments can help by reforming zoning and making the building process easier. Financial incentives, like reducing transfer taxes for home sellers and subsidizing major moves with tax breaks, would also add to supply.”
House hunters searching for large homes in the suburbs have seen the biggest drop in their options. Just about 16 of every 1,000 four-bedroom-plus suburban single-family homes sold in the first half of this year, down from 24 of every 1,000 that sold in the same period in 2019. That means buyers of that home type have 33 percent fewer houses to choose from, according to Redfin.
“New listings normally hit the market on Thursdays, and I have buyers who are excitedly checking their Redfin app Thursday mornings, only to find nothing new,” Phoenix Redfin Premier agent Heather Mahmood-Corley said. “That goes for buyers in every price range in every type of neighborhood, but what people want most are those move-in ready, mid-sized homes in neighborhoods with highly rated schools. Those are hardest to find because for people to buy one, someone needs to sell one. That’s not happening, because so many of those homeowners have low mortgage rates.”
The turnover rate has dropped for every size home in every type of neighborhood over the last four years (though buyers will have an easier time finding something for sale in certain metro areas).
The turnover rate of condos and townhomes didn’t shrink as much as that of single-family homes during the pandemic. Supply of that home type wasn’t depleted as much because there wasn’t as much demand for them.
Smaller houses in the city have the lowest turnover rate of all the home types in this analysis. Roughly 11 of every 1,000 two- and three-bedroom single-family homes in urban neighborhoods sold in the first six months of 2023, compared to 14 of every 1,000 during the same period in 2019.
Two- to three-bedroom homes in suburban neighborhoods are essentially tied with their urban counterparts for the lowest turnover rate, with 11 of every 1,000 changing hands this year. That’s down from 16 of every 1,000 in 2019, Redfin data shows.
Northern California has the lowest turnover rate in the U.S. Just six of every 1,000 homes in San Jose, Calif. changed hands in the first half of 2023, the lowest rate of the 50 most populous U.S. metros. It’s followed closely by Oakland, San Diego, Los Angeles, Sacramento and Anaheim, Calif., all places where about eight of every 1,000 homes turned over to a new owner.
The pandemic exacerbated the supply shortage throughout California, with the turnover rate dropping by at least 30 percent in each of those metros from 2019 to 2023.
Zooming in on large, suburban single-family homes, California still has the lowest turnover rate. California historically has the lowest housing turnover because the state’s tax laws–namely proposition 13–incentivizes homeowners to stay put by limiting property-tax increases, according to Redfin.
Newark, N.J. has the highest turnover rate in the U.S., with 24 of every 1,000 homes changing hands during the first six months this year. It’s followed closely by Nashville, Tenn. (23 of every 1,000) and Austin, Texas (22 of every 1,000). Nashville and Austin are also two of the three metros (along with Fort Worth, Texas) with the highest turnover for large suburban, single-family homes.
But Nashville and Austin are both among the five metros with the smallest declines in turnover since 2019, posting drops of just 10 percent and 14 percent, respectively. When it comes to large suburban houses, Nashville and Austin have the second and third smallest declines. That’s partly due to robust new construction in Nashville and Austin: Inventory of single-family homes for sale in both metros is made up of more than 30 percent newly built homes, compared to 22 percent nationwide, Redfin stated.
Only Milwaukee and Columbus, Ohio, which both saw overall turnover drop by about 8 percent from 2019 to 2023, had smaller declines in turnover than Nashville. Indianapolis comes in fourth, with a 14 percent decline. Milwaukee, Columbus and Indianapolis have relatively stable turnover because they didn’t experience huge homebuying demand swings throughout the pandemic.