Realtor confidence rises but economists warn of pessimistic outlook

Home sales fell in September due to a combination of higher interest rates and low inventory, but most realtors expect the market to improve in the next six months.

The National Association of Realtors’ latest Confidence Index shows that buyer traffic fell to 51 in September, down from 61 in September 2017.

The index collects monthly data from realtors about local real estate market conditions, plus the characteristics of buyers and sellers and other data about issues affecting the market and transactions. An index rating of above 50 suggests realtors expect things to improve.

Last month the seller traffic index also fell to 41, down from 45 one year ago, the NAR said.

The major issues affecting real estate sales in September continue to be the low inventory and higher interest rates, realtors said.

The stats may not look good but realtors are still optimistic that conditions in the single-family housing market will improve in the next six months. The all-important Confidence Index, which measures the six month outlook for real estate came in at 53 in September.

However, other housing markets aren’t expected to fare so well. The townhomes index came in at just 44, while the condo market index came in at 43.

As a result, some economists are predicting a more gloomy period head for real estate, in spite of realtors’ optimism.

“Our expectations for housing have become more pessimistic: Rising interest rates and declining housing sentiment from both consumers and lenders led us to lower our home sales forecast over the duration of 2018 and through 2019,” Fannie Mae Chief Economist Doug Duncan said.

Experts believe that the Fed is likely to raise interest rates one more time this year, most likely in December. That will be followed by more hikes in 2019. As a result, greater numbers of potential homebuyers may be pushed out of the market.

In fact, recent data from NAR showed that existing home sales hit their lowest level in three years, and Freddie Mac data shows interest rates are currently at a 10-year high. Now, these factors could be pushing more families to rent instead of buying a home.

Despite the difficult conditions, some home buyers managed to increase their share. First-time buyers accounted for 32% of sales in September, up from 29% in September last year.