Consumer confidence in housing market hits lowest in more than a decade

A sign stands outside a luxury home for sale in the Lake Pointe Subdivision of Austin, Texas.

Ed Lallo | Bloomberg | Getty Images

Consumer confidence in the housing market has fallen to its lowest level since 2011, as both potential buyers and sellers have become more pessimistic, according to a monthly survey published Monday by Fannie Mae.

Just 17% of those surveyed in July said now is a good time to buy a home, up from 20% in June. Even more telling, though, the proportion of sellers who think it’s a good time to list their home fell to 67% in July, from 76% two months earlier.

Far fewer consumers now think house prices will rise, while the proportion of those who think prices will fall has risen from 27% to 30%.

Fannie Mae’s Home Purchase Sentiment Index is made up of six components: terms of purchase, terms of sale, home price outlook, mortgage rate outlook, job loss concerns, and change in household income. All in all, the index fell two points to 62.8 in July. It is 13 points lower than a year earlier. It reached a record high of 93.7 in the summer of 2019, before the pandemic.

“Unfavorable mortgage rates are increasingly cited by consumers as one of the top reasons for the growing perception that it is a bad time to buy and sell a home,” wrote Doug Duncan, senior vice president and chief economist at Fannie Mae. in a let go.

The average 30-year fixed mortgage rate started this year around 3% and then began to climb steadily, briefly breaking the 6% mark in June, according to Mortgage News Daily. It has fallen back slightly since then, but is still in the middle of 5%.

Only 6% of respondents think mortgage rates will fall, while 67% expect interest rates to rise further.

Sales of both new and existing homes have fallen sharply in recent months as affordability is declining and consumers are concerned about inflation and the economy in general.

Large losses in the stock market have also caused demand for more expensive housing to fall. More offerings are hitting the market, which helps a bit, but the stock is still well below historical standards, especially at the entry level.

“With home price growth slowing and expected to slow further, we think consumer response to current housing conditions will be increasingly mixed: some homeowners may choose to list their homes earlier to take advantage of the perceived high prices, while some potential homebuyers may choose to delay their purchase decision, thinking home prices may fall,” Duncan added.

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