Consumer confidence in the housing market dropped to the lowest level since 2011, as both prospective buyers and sellers have become more pessimistic, according to a monthly survey released Monday by Fannie Mae.
In July, just 17% of those surveyed said now is a good time to buy a home, down from 20% in June. The share of sellers who think it is a good time to list their homes dropped to 67% in July from 76% two months ago.
More consumers think home prices will go up, while the share of those who think prices will fall fell from 27% to 30%.
Fannie Mae's Home Purchase Sentiment Index consists of six components : buying conditions, selling conditions, home price outlook, mortgage rate outlook, job loss concern and change in household income. The index fell two points to 62.8 in July. It was down 13 points from a year ago. It hit a new all time high of 93.7 in summer of 2019 before the pandemic.
In a release, Doug Duncan, Fannie Mae's senior vice president and chief economist, said that unfavorable mortgage rates have been cited by consumers as the reason behind the growing perception that it is a bad time to buy, as well as sell a home.
The average interest rate on the 30 year fixed mortgage started this year around 3% and then began rising steadily, briefly crossing the 6% line in June, according to Mortgage News Daily. It has fallen back a bit since then but is still in the mid- 5% range.
Only 6% of those surveyed think mortgage rates will fall, while 67% think they expect rates to rise further.
The sales of new and existing homes have fallen sharply over the last few months, as affordability weakens as consumers worry about inflation and the economy.
Demand for higher-end homes has fallen because of big losses in the stock market. More supply is coming on the market, but the inventory is still well below historical norms, especially at the entry level.
With home price growth slowing and projected to slow down further, we believe consumer reaction to current housing conditions is likely to be more mixed: some homeowners may choose to list their homes sooner to take advantage of perceived high prices, while others may choose to postpone their purchase decision believing that home prices may drop, said Duncan.