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Real estate agent Stephen Bremis talks on his phone while showing a property in Somerville, Mass. A recent survey found that 84% of respondents say now is a bad time to buy a house. (Credit: Brian Snyder, REUTERS)
The sentiment in the United States housing market has further deteriorated in recent months due to the continuous increase in borrowing costs, as reported by Fannie Mae.
The Fannie Mae Home Purchase Sentiment Index experienced a decline of 2.4 points, falling to 64.5 in September. However, it's important to note that this figure remains 3.7 points higher than the levels recorded a year ago.
A mere 16% of consumers expressed the belief that the current period is favorable for home purchases. This figure matches the record low set in the previous year.
The persistent surge in mortgage rates, which have now surpassed 7%, appears to be deepening consumers' apprehension about entering the housing market. High mortgage rates have taken precedence over elevated home prices as the primary reason for consumers perceiving this as an unfavorable time to buy a home.
Mortgage rates climbed last week, driven by surging Treasury yields. The average 30-year fixed mortgage rate reached 7.49%, according to Freddie Mac.
Sellers participating in the survey also pointed to high mortgage rates as the primary factor influencing their negative outlook on selling their homes. This suggests that the housing inventory shortage is likely to persist, contributing to the ongoing surge in home prices.
Consumers have expressed concerns about housing affordability, with the expectation that home prices will continue to rise over the next year. Furthermore, respondents indicated signs of economic strain, including reduced year-over-year household incomes and diminished job security.
The pessimistic sentiment regarding the housing market is expected to continue weighing down on sales activity. Even if the U.S. manages to evade a recession, the downturn in home sales is anticipated to endure for a prolonged period, according to previous assessments by Fannie Mae.
Housing affordability conditions are currently deemed among the most challenging in history, according to an analysis by the Mortgage Bankers Association. Home prices have surged by over 40% compared to pre-pandemic levels, and it would require a significant change in either income (a 55% increase) or property prices (a 35% decline) to return to those prior levels, according to industry experts.
