Americans are desperate about housing.
In the latest reconnaissance Through Fannie Mae’s measure of housing confidence, 84% of respondents in September said now was a bad time to buy a home, a high percentage in the survey. Only 16% believe this is a good time to buy, which matches the lowest level recorded last year.
The pessimism underscores the extent to which the recent rise in mortgage interest rates has affected the housing market, with buyers and sellers holding out little hope that conditions will improve any time soon.
“Mortgage rates consistently above 7% appear to be exacerbating the distress consumers feel about the homebuying market,” Doug Duncan, Fannie Mae’s chief economist, said in a news release. “In fact, higher mortgage rates have surpassed higher home prices as the top reason consumers believe this is a bad time to buy a home, preliminary survey found.”
Read more: First-time home buyer in 2023: What you need to know
‘Confidence is unlikely to change’
Only 17% of respondents believe mortgage rates will fall in the next 12 months, according to Fannie Mae, while 46% of consumers expect rates to continue rising over the same period. The remaining 37% expect prices to remain the same.
Interest rates have remained above 7% for eight straight weeks, a stretch not seen since 2000. Mortgage interest rates are expected to remain high after the Federal Reserve recently indicated that interest rates overall will remain “higher for longer.” “. Last week’s jobs report, which showed that the US economy added a staggering 336,000 new jobs in September, only provided further support for the central bank’s position.
Rising mortgage rates have crushed affordability, with buyers paying the highest mortgage payments ever, according to Black Knight. As a result, buyers backed off.
Read more: Mortgage rates at 20-year high: Is 2023 a good time to buy a home?
Mortgage application volume fell to its lowest level since December 1996 in September Mortgage Bankers Association (MBA), as purchase orders reached a 28-year low.
“Confidence is pretty much at a record low and seems unlikely to change,” Danielle Hale, chief economist at Realtor.com, told Yahoo Finance. “Because mortgage rates and home prices are still really high, buying a home today takes a big chunk of people’s paychecks. Consumers know that and they’re not confident in the housing market because it’s so expensive right now.”
‘No relief in sight’
Homebuyers weren’t the only ones with growing concerns.
Fannie Mae found that 37% of Americans said this is a bad time to sell, compared to 34% in August, citing mortgage rates as the main reason.
“This suggests to us that many homeowners may not be eager to give up low mortgage interest rates anytime soon, but it may also reflect some homeowners’ concern that sales values may decline,” Duncan said. Little if the pool of qualified homebuyers is restricted by high rates.”
Homeowners’ reluctance to list has kept inventory limited and supported home prices.
The national average menu price decreased seasonally to $430,000 in September, according to Realtor.com. This is up 0.4% from a year ago, Realtor.com analysts said, and marks the second straight month that listing prices have risen year-over-year.
Prospective buyers haven’t shown much optimism when it comes to home prices either. Fannie Mae found that 42% of respondents believe prices will rise over the next year, compared to just 23% who expect prices to fall.
“Consumers also don’t see much of an easing in affordability on the horizon, as they continue to expect home prices to rise in the next 12 months,” Duncan said. “They also indicated that their personal economic situations were showing signs of stress, including lower household income year-on-year and a decreased sense of job security.”
“In our view, all of this suggests that home affordability remains an issue for the foreseeable future, which we expect will keep home sales sluggish next year,” Duncan added.
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