Consumer confidence in housing falls to lowest point in 11 years

Fannie Mae said in a monthly survey released this week that consumer’s confidence in the housing market is now at its lowest level since 2011, with both buyers and sellers increasingly pessimistic.

According to the survey, just 17% of respondents believe now is a good time to buy a home, down from 20% one month prior. However, the more telling statistic is that just 67% of sellers believe now is a good time to sell, down from 76% in June.

There are also far fewer consumers who think home prices will rise, with just 27% expressing optimism, down from 30% a month before.

Fannie Mae’s Home Purchase Sentiment Index comprises six factors - buying conditions, selling conditions, home price outlook, mortgage rate outlook, job loss concern and changes in household income. Overall, the index was down two points to 62.8 at the end of July. It’s down 13 points from the same month one year earlier, having hit an all-time high of 93.7 in the summer of 2019, prior to the pandemic.

“Unfavorable mortgage rates have been increasingly cited by consumers as a top reason behind the growing perception that it’s a bad time to buy, as well as sell, a home,” said Fannie Mae Senior Vice President and Chief Economist Doug Duncan.

The average rate on the popular 30-year fixed-rate mortgage was about 3% at the start of the year, but has risen steadily since. It briefly topped 6% in June, but is now hovering in the mid-5% range.

Just 6% of survey respondents believe mortgage rates will decrease, with 67% saying they expect further raises.

The index matches the reality on the ground. Sales of both new and existing homes in the U.S. have declined sharply in the last few months, with affordability weakening and consumers worried about inflation and broader economic woes. Meanwhile, big losses in the stock market have resulted in lower demand for higher-end homes. More inventory is coming onto the market, at least, but the stock of homes for sale remains far below traditional norms.

“With home price growth slowing, and projected to slow further, we believe consumer reaction to current housing conditions is likely to be increasingly mixed,” Duncan said. “Some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential homebuyers may choose to postpone their purchase decision believing that home prices may drop.”