They say that the longer sellers hold onto properties, the more equity they will realize. In recent years, however, just the opposite has been the case.
Two years ago, in 2009, sellers made a median $36,000 when they sold, a 27 percent price gain. Owners who sold their home last year realized a median price gain of only $26,000, or 16 percent, according to the 2011 Profile of Home Buyers and Sellers from the National Association of Realtors.
“Generally the longer a seller is in the home the greater the increase attributable to price appreciations; however, the recent path of home prices has resulted in the level of equity, in homes with seller tenures of 1 to 5 years, to vary from that trend,” explains the report.
Owners who sold after 4-5 years are faring the worst. After purchasing at the height of the boom, they are losing $1200 for a net loss of 1 percent. Those who bought before the peak in 2006 are doing well even though prices on average have fallen more than 30 percent since then. Sellers with tenures of 11 to 15 years are realizing median gains of $57,900, or 39 percent. Those with 16 to 20 years in a home are seeing a $138,000 return, or 161 percent.
Unfortunately, the major reasons people sell their homes force many to sell long before than can realize significant equity gains. Leading motivations to sell are job relocation (17 percent), home is too small (17 percent) and want to move closer to friends and family (15 percent).
As a result of the economy, including negative equity which makes homes worth less than value of the mortgages used to buy them, the median time Americans own a home has lengthened to 9 years from a low of 6 years in 2007. Sellers of detached single-family homes, which account for the largest share of homes sold, owned their home for a median of 10 years. Yet even with the longer tenure, owners are realizing significantly lower returns than they did three years ago.