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Homebuyers are extremely pessimistic about the housing market

Fannie Mae's home purchase sentiment index hits lowest level since 2011

Despite continued home price appreciation and a volatile mortgage rate environment that has resulted in the least affordable housing market in decades, there remains a minority of consumers who still feel that now is a good time to buy a home.

According to Fannie Mae‘s latest Home Purchase Sentiment Index, 19% of consumers feel that now is a good time to buy a home. In August, 22% of consumers said it was a good time to buy. The housing market index fell 1.2 points in September to 60.8, marking the seventh consecutive month of declines. The index is down 13.7 points from this time last year.

In September, 75% of consumers said it was a bad time to buy, up from 73% in August.

“The HPSI declined this month to its lowest level since October 2011,” Doug Duncan, Fannie Mae’s senior vice president and chief economist, said in a statement. “Moreover, 75% of consumers still think it’s a bad time to buy a home, with most citing high home prices and unfavorable economic and mortgage rate conditions as primary reasons.”

On the seller side, 59% said it was a good time to sell, remaining unchanged from a month ago, while the share of respondents who said it is a bad time to sell dropped to 33% from 35% in August, which is good news for real estate agents who have been struggling to generate listings in a brutal housing market.

“As long as supply is limited and affordability pressures continue to constrain potential homebuyers via elevated home prices and mortgage rates, we expect home sales will remain sluggish,” Duncan said.

Creating a path to success in today’s purchase market

Meeting the needs of a new generation of homebuyers while managing the ebbs and flows of a volatile housing market is a major endeavor for any mortgage lender. So, what should lenders be doing to thrive in the face of a post-pandemic housing market rife with new hurdles?

Presented by: Calyx

For the first time since May 2020, more respondents than not expect home prices to decline. In September, the percentage of respondents who say prices will increase in the next 12 months dropped from 33% to 32%, while the percentage who say prices will go down increased from 33% to 35%. Overall, the net share of respondents who say home prices will go up decreased three percentage points month over month.

“Consumers’ expectation that home prices will decrease matched a survey high, with a higher percentage of consumers believing home prices will decrease rather than increase over the next year – a shift in survey sentiment that had previously only happened in 2011 and at the start of the pandemic in 2020,” Duncan said.

As the housing market remains volatile and Federal Reserve observers expect at least three more rate hikes in the coming months, the share of respondents who say mortgage rates will go down in the next 12 months dropped from 11% to 9%, while the percentage who expect rates to go up increased from 61% to 64%. In addition, the share who think mortgage rates will stay the same dropped from 25% to 20%.

Mortgage rates were particularly volatile last week. They jumped from 6.53% on Monday to 7.12% by the end of day Friday, according to Mortgage News Daily.

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