Are people reselling homes they just bought due to financial stress?

The share of homes listed for sale that were only bought recently – ‘quick resales’ – has increased over the past 18 months.

About 13%, or one in eight homes, sold nationally were purchased three or less years ago, about the same share seen before the pandemic.

But this is up significantly from just 9% during the pandemic.

This increase coincides with the increase in interest rates from May 2022, which has led some to suggest that this quick resale share reflects people reassessing the affordability of homes bought when interest rates were at record lows.

Mortgage repayments have increased by as much as 70% since 2022, on top of strong general cost-of-living pressures.

But there are other less concerning explanations.

While rising interest rates have put some households under increased financial stress, rising property values are likely a bigger factor driving the increase in quick resales. Picture: Getty

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Some people resell homes due to their family or job circumstances changing. Others sell when they can afford to upgrade, which may be sooner than expected if home values grow very quickly in their area, or from other financial changes such as promotions or inheritance.

People who bought in 2021 are starting to sell

Part of the increase in quick resales is from the large group of 2021 purchasers starting to sell

Some people resell homes quickly because their lives change. It could be because they need a bigger home for their family, or to be close to their extended family, or maybe because their job location shifted.

These sales will naturally be a higher share of all sales if more people bought three years ago. And this is what we see.

The strong amount of market activity in 2021 — when interest rates fell, and people reassessed living arrangements during the pandemic — is now translating into more 2021 buyers (who bought less than three years ago) making up a bigger share of the current market.

Positive housing market conditions are boosting resales

Many refer to the housing market as a ladder – few can buy their dream home at first. It takes years of saving and building equity for many to be able to afford the home they aspire to live in.

But if home values grow quicker than expected, this can accelerate the jump to the next rung on the ladder.

Across our cities, we can see a strong positive relationship between regions where home prices have grown significantly over the past four years, and the share of sellers in the market who are reselling their homes after a relatively short period of time.

This trend is evident everywhere except Adelaide – but price growth there has been strong across the whole city.

This relationship suggests that a key driver of resales of homes bought over the past year has been positive financial boosts from exceptionally strong home price growth enabling home upgrades.

Weaker job markets are associated with more quick resales

Nonetheless, higher rates of financial stress may also be responsible for some of these quick resales.

Many may be able to make ends meet as repayments have increased over the past couple of years, but job loss is difficult to manage for any household. So if financial stress is a key driver of quick resales, we expect to see more where employment conditions are less favourable.

We do see some positive relationship between regions with higher unemployment rates and those with higher shares of quick resales. But the relationship is very slight in most markets.

However, regions in Melbourne display a clear trend. Melbourne has also seen lower rates of home price growth than other cities, so challenging financial circumstances may be having a larger effect on quick resales there.

Overall, the rate of quick resales seems to reflect positive financial situations, rather than stress

Combining both price gains since the pandemic and current unemployment rates into regression analysis suggests price increases are much more important in explaining recent resale proportions across regions – somewhere between 3.5 and 5.8 times more.

So the most likely explanation for higher rates of quick resales is that unexpectedly high price growth has enabled home upgrades.

But the regions with high price growth since the pandemic are those that had strong interstate migration to lifestyle regions. So some of these resales may reflect people returning to cities since the pandemic, or that their lifestyle changes haven’t stuck.

Given the financial challenges many are facing with dramatically higher mortgage repayments, we will continue to monitor how that is impacting activity across the housing market. But so far most appear to be managing their financial circumstances.