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Homebuyers Decide Grass Isn't Greener and Stay Put

Stocks in this article: TOLHXB

NEW YORK (TheStreet) -- Americans seem content to stay put in their homes and that is bad news for homebuilders. According to a study from RateWatch, 81% of homeowners said they have no plans to purchase a different home. Less than 3% will be shopping for a home within the year. Why? They're happy with their house.

The same amount, 80%, say they like their home and don't want to leave. Only a small amount, less than 5%, say they have to stay because they owe too much money to sell. So many of these homeowners could move, they just prefer not to.

The picture doesn't get any brighter for the property virgins: 57% of people that currently don't own a home have no plans to go shopping now, although a year from now about 9% think they will make a purchase. Many are still in school or just prefer to rent.

A quarter of these potential homebuyers just don't feel financially stable enough to commit to a house. However, it didn't matter how much money they made. It's understandable that someone making less than $25,000 a year doesn't feel like they can afford a home, but it's shocking that someone who makes over $150,000 a year feels equally poor.

>>Read More: Pending Home Sales Slightly Worse Than Expected

The higher home prices could be a good reason why. Homes have hit record high prices during April in markets like Houston, Austin, Portland and even Central Indiana. This past week, the Case-Shiller index showed that home prices had risen 12.4% over last year. Inventories are also low, so existing homeowners are content knowing they have a home. Those without a home aren't interested in joining the chase.

Higher prices have been great for earnings from companies like Toll Brothers (TOL), who benefited from raising the prices of their homes. This is bad news for home stores like Home Depot (HD) and Lowe's (LOW). They depend on housing turnover to push people into the stores. Whether it's fixing up a new place or fixing up the old one to sell it, they need an active market. The Commerce Department reported on Thursday that residential building and home improvements had dropped 5% during the first three months of the year.

>>Read More: Toll Brothers Impressive Quarterly Results

It's also bad for the banks. When people finally decide to take the plunge, it seems they only care about the rates. It was the most important deciding factor in choosing a lender. This singular focus on the monthly note shows that these consumers remain budget conscious and could still be scarred from the financial crisis.

It looks like the homebuilders will have to take a pause on hiking their home prices or they will scare away all their potential customers. Same with the banks, higher rates have chased away potential buyers.

-- Written by Debra Borchardt in New York.

 

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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