Spring house-hunting season is upon us. Home searches peak in March and April, and this year the search is especially frantic as inventory is near a 12-year low. Many homes don't stay on the market for long, so buyers will have to move fast -- especially in markets with bidding wars and competing investor activity. But when it comes to searching for a home, as with everything else, moving too fast leads to mistakes and regrets. To find out which regrets are most common -- and who is most prone to making decisions they'll later regret -- we asked more than 2,000 consumers what, if anything, they regret about their current home and most recent home-search process.
Buyers in a Rush; Sellers, Not So MuchThe biggest challenge for home buyers this season is the lack of inventory, which is down 20-25% year-over-year and near its lowest level since before the housing bubble. Our consumer survey shows that people think now is the time to buy, not sell: 75% of respondents agreed with the statement "it would be better to buy a home now than one year from now," but only 32% of respondents (and just 29% of current homeowners) felt the same way about selling now rather than one year from now.
Eager buyers, patient sellers: people want to buy before prices rise further, but no one wants to sell at the bottom-especially if they're still underwater. These attitudes point to a 2013 housing season with bidding wars and stiff competition among buyers who want to get ahead of further price increases.
On the rental side, too, inventory remains tight: Census data show rental vacancy rates also near a 12-year low. So whether they're looking to buy or rent, house hunters in 2013 will feel like they don't have the luxury of taking their time and holding out for the perfect home. Many will need to act fast -- and some will make decisions that they could regret later. With that in mind, we asked current homeowners and renters about their housing regrets; their answers are lessons for today's house-hunters.
What Homeowners Regret About their Homes
Just over half of people -- 52% -- have at least one regret about their current home or the process of choosing it. (In this analysis, we exclude the 11% of respondents who said they were not involved in the process of choosing their current home.) Renters are more likely to have regrets than homeowners -- 56% of renters versus 50% of homeowners -- and their regrets are somewhat different, so we look at homeowners and renters separately.
Among homeowners, the top regret is wishing they had chosen a larger home: 34% of homeowners with regrets -- that's 17% of all homeowners -- mentioned this. The second most common regret -- 27% of homeowners with regrets -- is wishing they had done more remodeling when they bought the home. Third was wishing they had more information about the home before choosing it.
Overall, people wish they had invested more in their home, not less. Homeowners are five times more likely to wish they had remodeled more than remodeled less; four times more likely to wish they put more money down, not less; and three times more likely to wish they purchased a larger home than a smaller home.
What Renters Regret About their Homes
Renters have similar regrets -- but are more likely to have them. They, too, wish they had chosen a larger home: 39% of renters with regrets did, making it the second-most common regret. And, renters, like homeowners, wish they had chosen a home with a shorter commute more so than the other neighborhood features we asked about: better schools and less crime. The top regret, though, was wishing they bought instead of rented, which 42% of renters with regrets -- and 23% of renters overall -- mentioned.
The biggest difference in the regrets of homeowners and renters is that 23% of all renters wished they had bought instead of rented, while just 3% of homeowners wished they had rented instead of bought. When it comes to buying versus renting, regret pretty much goes in only one direction.
Youthful Regrets
Among Millennials -- those age 18 to 34 -- 70% have at least one regret about their current home or most recent search process. Among Millennial homeowners, 75% have regrets, compared with just 36% of homeowners age 55 and older. Young renters, too, are more likely to have regrets than older renters, but the age gap in regrets is especially stark among homeowners.
As the Market Recovers, Some Regrets Fade
The housing bubble, which peaked from 2003-2006, and the years of falling prices that immediately followed, created many regrets that are now becoming less common as the housing market recovers. The top real estate regrets -- wishing you had bought a larger home and wishing you had remodeled more when you bought -- were most common among homeowners who moved into their current home during the boom years of 2003-2006, when housing was at its most expensive. Among homeowners who moved into their current home in those years, 25% wish they had bought a larger house, compared with just 15% of homeowners who moved into their current home from 2010-2013. Homeowners who moved into their current home between 2010 and 2013 also have fewer financial regrets than people who moved into their current home during (2003-2006) or just after (2007-2009) the bubble: these most recent buyers were also less likely to wish they shopped around for a better mortgage, wish they borrowed less against their home, or wish that they had understood the costs of homeownership better.
Why are recent buyers less likely to have regrets? In 2010-2013, prices have been relatively affordable, mortgage rates have been very low, banks have been conservative in their lending, and the pain of the foreclosure crisis taught tough lessons about the risks and costs of homeownership -- all of which have helped recent buyers make housing decisions with fewer regrets. Recent buyers have also seen prices appreciate since they bought, which should help them avoid one of the most painful housing regrets of the crisis: 46% of people who walked away from their home (i.e., defaulted on their mortgage) regret that they did.
Slow Down to Avoid Regrets
Market conditions in 2013 could pressure this year's buyers and renters into making real estate decisions that they'll regret. Buyers and renters need to brace themselves for a season of slim pickings: but rather than jumping on the first home that seems good enough, they should focus on not making decisions that lead to regrets.
Of course, regret is hard to avoid. On one hand, people regret not investing more in their homes: many homeowners and renters wished they had chosen larger homes; homeowners wished they remodeled more and put more money down. On the other hand, many homeowners and renters regret not having been more financially secure before choosing their home. Furthermore, homeowners were much several times likelier to wish they had borrowed less against their home rather than more.
So how can people avoid these big regrets by investing more in their house (e.g., bigger home, more remodeling, buying instead of renting) while being more financially conservative? By waiting: it's a lot easier to invest more in a home without overstretching financially if you've had more years to save and gain financial wisdom. For many, savings and wisdom come only with age -- no wonder older adults have far fewer regrets. Even though our survey revealed that most people believe that it's better to buy now than one year from now, waiting until you're financially secure enough to invest more in your house could turn out to be the decision you won't regret.
SURVEY METHODOLOGY
This survey was conducted online within the United States by Harris Interactive on behalf of Trulia from March 22-26, 2013 among 2,130 adults ages 18 and older, among which 1,370 are homeowners and 706 are renters. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables, please contact pr@trulia.com.