Home Buyers More Pessimistic, But Inventory Problems May Be Shifting
Written By: Joel Palmer, Op-Ed Writer
In the housing market, there continues to be growing optimism regarding selling a home and more pessimism about buying.
Fannie Mae released its latest monthly Home Purchase Sentiment Index last week. The survey found that 64 percent of respondents thought the current environment makes it a bad time to buy a home, up from 56 percent the previous month.
On the flip side, 77 percent of respondents believed it was a good time to sell, up from 67 percent the previous month.
“Consumers continued to cite high home prices as the predominant reason for their ongoing and significant divergence in sentiment toward homebuying and home-selling conditions,” said Doug Duncan, Fannie Mae senior vice president and chief economist.
Another bad sign for the immediate future of home purchases is that 48 percent of respondents believe home prices will continue to rise in the next 12 months and only 6 percent think mortgage rates will decrease over the next 12 months. In other words, if now is not a good time to buy a home, most potential buyers don’t think the environment will get any better in the next year.
Mortgage lenders hoping for more first-time buyers to take advantage of low lending rates may not get their wish anytime soon.
“While all surveyed segments have expressed greater negativity toward homebuying over the last few months, renters who say they are planning to buy a home in the next few years have demonstrated an even steeper decline in homebuying sentiment than homeowners,” said Duncan. “It’s likely that affordability concerns are more greatly affecting those who aspire to be first-time homeowners than other consumer segments who have already established homeownership.”
A potential bright spot for the mortgage industry this past week is that new listings for the week ending July 4 surpassed the number of new listings during the same period in 2019. This is the first time this has happened this year, according to Redfin.
However, this increase in listings didn’t boost home buying demand. Redfin’s data showed pending sales posted their smallest year-over-year increase in almost a year. They also fell twice as fast month-to-month as they did during the same time in 2009.
“Many buyers have backed away from the housing market and are waiting until more and better homes are listed,” said Redfin Chief Economist Daryl Fairweather. “Buyers don’t have the same sense of urgency that they did at the beginning of the year. They aren’t racing to buy before prices increase, because asking prices have already increased and stabilized. And they aren’t racing to buy before mortgage rates go up, because rates have dropped back below 3 percent and are likely to stay low. With more new listings starting to come on the market, buyers who threw in the towel may want to look again because the market is tilting more in their favor.”
“Despite the pessimism in homebuying conditions, we expect demand for housing to persist at an elevated level through the rest of the year,” said Duncan. “Mortgage rates remain not too far from their historical lows, and consumers are expressing even greater confidence about their household income and job situation compared to this time last year, when the pandemic had shut down wide swaths of the economy.”
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
