Consumer Sentiment On Housing Hits Lowest Level Since May 2020


Consumers across the country continue to report difficult homebuying conditions due to inflation, higher mortgage rates, and home price appreciation.

Doug Duncan, Fannie Mae Senior Vice President and Chief Economist, says that in April their Home Purchase Sentiment Index fell to its lowest level since the spring of 2020.

The percentage of respondents who said it is a good time to buy a home decreased from 24% to 19%, while the percentage who said it is a bad time to buy increased from 73% to 76%.

As a result, the net share of those who say it is a good time to buy decreased 8 percentage points month over month, according to the survey.

“The current lack of entry-level supply and the rapid uptick in mortgage rates appear to be adversely impacting potential first-time homebuyers in particular, evidenced by the larger share of younger respondents (aged 18- to 34) reporting that it’s a ‘bad time to buy a home,’” Duncan said in a statement.

Consumer perception regarding the ease of getting a mortgage also decreased across nearly all surveyed segments last month. This suggests that the benefits of the recent past’s historically low mortgage rates have diminished, he said.

According to Duncan, affordability could become an even greater constraint going forward.

“This sentiment is consistent with our forecast of decelerating home sales through the rest of 2022 and into 2023,” Duncan said.

The percentage of respondents who said home prices will go up in the next 12 months decreased from 48% to 44%, while the percentage who said home prices will go down increased from 20% to 25%.

The share who think home prices will stay the same decreased from 28% to 26%.

As a result, the net share of Americans who say home prices will go up decreased 9 percentage points month over month, according to the survey.

The percent of respondents who said they expect mortgage rates to go up increased from 69% to 73%.

Rates shot back up after a one-week reversal of their upward trend, averaging 5.29%, Freddie Mac reported Thursday.

“Mortgage rates resumed their climb this week as the 30-year fixed reached its highest point since 2009,” said Sam Khater, Freddie Mac’s Chief Economist.

Khater said while housing affordability and inflationary pressures pose challenges for potential buyers, house price growth will continue but is expected to decelerate in the coming months.

What does this mean for sellers?

The number of people who responded to the Home Purchase Sentiment Index and said it is a good time to sell decreased from 74% to 72%, while the percentage who say it’s a bad time to sell remained unchanged at 21%.

More sellers are dropping their asking prices.

In April, 15% of home sellers dropped their asking prices, a 5.9% YOY increase, Redfin reported.

Redfin Chief Economist Daryl Fairweather said even though price drops are becoming more common, most homes are still selling above the asking price and in record time.

The median home sale price was up 17% YOY, the biggest hike since August.

People have been speculating on whether there is a housing bubble likely to burst in the near future.

In March blog post, Researchers and Economists from the Federal Reserve Bank of Dallas wrote of indications that real-time market monitoring is picking up signs of a “brewing U.S. housing bubble.”

Mike Hardy, Managing Partner at Churchill Mortgage for California & Nevada Business, doesn’t believe there’s a bubble. He said that while no market’s unstoppable, this market has solid momentum.

“The market’s a function of supply and demand. In no uncertain terms, there is huge demand and a lack of supply. It would require an unexpected flood of unforeseen supply — or a rapid fall-off of demand,” Hardy said.

Reporter Chuck Green contributed to this article.

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