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Mounting Concerns Among Americans Surrounding the Housing Market

Mounting Concerns Among Americans Surrounding the Housing Market

The sentiment surrounding the U.S. housing market has taken a notably somber turn. According to the most recent housing sentiment survey conducted by Fannie Mae in September, a striking 84% of respondents expressed the view that the current period is an unfavorable time to purchase a home. This figure represents a survey high and underscores the prevailing pessimism. In contrast, a mere 16% believed that the present moment is conducive to buying a home, a level that matches an all-time low recorded the previous year.

This pervasive pessimism can be largely attributed to the recent surge in mortgage rates, which has created significant headwinds for both prospective buyers and sellers. The prevailing sentiment is one of uncertainty, with little hope that market conditions will improve in the near term.

Fannie Mae’s Chief Economist, Doug Duncan, remarked, “Persistently high mortgage rates, consistently above 7%, appear to be deepening the apprehension consumers feel about the home purchase market.” Notably, high mortgage rates have now surpassed high home prices as the primary reason why consumers perceive it as an inopportune time to enter the housing market. Only 17% of respondents anticipate a decrease in mortgage rates over the next 12 months, while a substantial 46% expect rates to continue their ascent during the same period. The remaining 37% anticipate that rates will remain steady.

Mortgage rates have remained above 7% for an uninterrupted eight-week period, a scenario not observed since 2000. These elevated rates are projected to persist, following the Federal Reserve’s recent indication that interest rates, in general, will remain “higher for longer.” The September job report, which revealed the addition of 336,000 new jobs in the U.S., further solidified the central bank’s stance.

The impact of higher mortgage rates on affordability has been profound, with buyers facing the highest mortgage payments on record, as reported by Black Knight. Consequently, prospective homebuyers have retreated, as evidenced by the Mortgage Bankers Association (MBA) data, which indicated that mortgage applications reached their lowest level since December 1996 in September, with purchase applications hitting a 28-year nadir.

Danielle Hale, Chief Economist at Realtor.com, noted, “Confidence is pretty much at a record low and seems unlikely to change. Given mortgage rates and home prices remain really high, it takes a large chunk of people’s paychecks to buy a home today. Consumers know that and are not as confident in the housing market because it’s so expensive right now.”

The concerns extend beyond prospective homebuyers, as Fannie Mae found that 37% of Americans also view this as a disadvantageous time to sell, a notable increase from the 34% recorded in August. Mortgage rates again topped the list of reasons for this sentiment.

Duncan commented, “This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon, but it may also reflect worry of some homeowners that sales values might be suppressed slightly if the pool of qualified homebuyers is constrained by elevated rates.” This reluctance to list properties has contributed to constrained inventory levels and supported higher home prices.

Despite seasonal fluctuations, the national median list price increased to $430,000 in September, as reported by Realtor.com, marking a 0.4% year-over-year gain. This represents the second consecutive month of annual increases in listing prices.

Prospective buyers appear to share a similar outlook regarding home prices, with 42% of Fannie Mae’s survey respondents anticipating price increases within the next year, while only 23% expect prices to soften.

Duncan concluded, “Consumers are also not seeing much affordability relief in sight, as they continue to expect home prices to increase in the next 12 months. 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.” Consequently, the outlook suggests that home purchase affordability will remain a persistent challenge, likely resulting in sluggish home sales into the foreseeable future.

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