Consumer confidence in the housing market continued to decline in September, as rates and home prices continued rise, eroding affordability.
According to Fannie Mae’s Home Purchase Sentiment Index, only 16% of consumers said it’s a good time to buy a home, matching the all-time survey low set last year.
And while 63% of consumers said it was a good time to sell a home, that was down 3 percentage points compared with August.
Doug Duncan, senior vice president and chief economist for Fannie Mae, says consumers view higher mortgage rates as being the main culprit destroying affordability, as opposed to higher home prices.
“Mortgage rates persistently over 7 percent appear to be deepening the malaise consumers feel about the home purchase market,” Duncan says in a statement. “In fact, high mortgage rates surpassed high home prices as the top reason why consumers think it’s a bad time to buy a home, a survey first.
“Notably, the share of consumers expressing pessimism about homebuying conditions hit a new survey high in September, with 84 percent now indicating that it’s a bad time to buy a home,” Duncan says. “On the sell side, respondents also listed unfavorable mortgage rates as the top reason why they believe it’s a bad time to sell a home. This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon, but it also may reflect the worry of some homeowners that sale values might be suppressed slightly if the pool of qualified homebuyers is constrained by elevated mortgage rates.”
Only 17% of consumers indicated that they expect mortgage rates to go down over the next 12 months, according to the survey.
“Consumers are also not seeing much affordability relief in sight, as they continue to expect home prices to increase in the next 12 months,” Duncan says. “They also indicated that their personal economic situations are showing signs of strain, including lower year-over-year household incomes and a reduced sense of job security. In our view, all of this points to home purchase affordability remaining a problem for the foreseeable future, which we forecast will keep home sales sluggish into next year.”
The percentage of respondents who say home prices will go up in the next 12 months increased from 41% to 42%, while the percentage who say home prices will go down decreased from 26% to 23%. The share who think home prices will stay the same increased from 33% to 35%. As a result, the net share of those who say home prices will go up in the next 12 months increased 4 percentage points month over month.
The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 78% to 75%, while the percentage who say they are concerned increased from 22% to 23%. As a result, the net share of those who say they are not concerned about losing their job decreased 3 percentage points month over month.
Photo: Darius Bashar