Confidence at its lowest point since 2011, says Fannie Mae

  • Only 16% of Americans think now is a good time to buy a home, according to a Fannie Mae survey.
  • Rising mortgage rates now at 7% and high house prices are putting potential buyers off.
  • “We expect home sales to slow 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 began studying the industry more than a decade ago.

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

Only 16% of those surveyed believe now is a good time to buy a home, down from 19% last month.

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

Rising mortgage rates and soaring home prices are driving potential buyers away from the real estate market, according to Fannie Mae’s chief economist.

“Consumers are increasingly pessimistic about the conditions for buying and selling homes,” said the firm’s senior vice president, Doug Duncan.

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

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

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

High home prices are also alienating potential buyers, with the national median home price rising 40% since the start of the pandemic in March 2020 as fiscal stimulus-driven demand collided with supply. limited, according to ING.

Fannie Mae forecast that home sales, already down for eight straight months, will continue to fall as the market becomes even less affordable.

“As continued affordability restrictions reduce demand from homebuyers and homeowners become reluctant to sell at potentially reduced prices, we expect home sales to decline further in the coming months,” Duncan said.

Some experts believe that the downturn in the US housing market could lead the Fed to reassess its monetary tightening policy. Wharton professor Jeremy Siegel has said that the US central bank is overlooking how significantly house prices are falling, as available data is retrospective.

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

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