Americans’ confidence in home buying has fallen to its lowest level since Fannie Mae’s survey began

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Rising mortgage rates and high house prices are driving potential homebuyers away, according to Fannie Mae’s chief economist.

  • Just 16% of Americans believe now is a good time to buy a home, a Fannie Mae survey found.
  • Rising mortgage rates now at 7% and high house prices are putting off potential buyers.
  • “We expect home sales to slow even further in the coming months,” Fannie Mae’s chief economist said.

Americans haven’t felt this gloomy about the US housing market since Fannie Mae first started surveying the sector over a decade ago.

The government-sponsored mortgage provider’s Home Purchase Sentiment Index, which tracks attitudes towards both buying and renting, fell 4.1 points to 56.7 in October for its lowest reading since it began in 2011.

Just 16% of respondents believe now is a good time to buy a home, down from 19% last month.

Meanwhile, the percentage who feel it is a bad time to buy rose from 75% in September to a record 80% in October.

Rising mortgage rates and elevated home prices are both pushing potential buyers away from the housing market, according to Fannie Mae’s chief economist.

“Consumers are increasingly pessimistic about both homebuying and home-selling conditions,” the firm’s senior vice president Doug Duncan said.

“Amid persistently high home prices and unfavorable mortgage rates, the ‘bad time to buy’ component increased to a new survey high this month, while the ‘good time to sell’ component continued its downward trend.”

Mortgage rates have soared this year as the Federal Reserve hikes interest rates to try to curb red-hot inflation, with higher borrowing costs making it harder for homebuyers to enter the market.

The 30-year mortgage rate averaged 6.95% as of Thursday, according to Freddie Mac, compared with 3.09% a year ago.

High home prices are also alienating potential buyers, with the national average house price jumping 40% since the start of the pandemic in March 2020 due to fiscal stimulus fueled demand clashing with tight supply, according to ING.

Fannie Mae forecast home sales – which have already fallen for eight consecutive months – to carry on slumping as the market becomes even less affordable.

“As continued affordability constraints reduce homebuyer demand, and homeowners become reluctant to sell at potentially reduced prices, we expect home sales to slow even further in the coming months,” Duncan said.

Some experts believe the downturn in the US housing market could prompt the Fed to re-evaluate its policy on monetary tightening. Wharton professor Jeremy Siegel has said the US central bank is overlooking how significantly home prices are declining, as the available data is backward-looking.

Read more: The Fed’s latest jumbo hike will put ‘lead into the heels’ of the US housing market, Freddie Mac says

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