Consumers Down In The Dumps On Homebuying Despite Optimism About Personal Finances

As inflation slowly cools, consumers are feeling a lot more secure in their personal finances. But when it comes to homebuying, they’re still in the dumps.

Leaders at Fannie Mae said the Home Purchase Sentiment Index increased by 4 points YOY in July as consumers responded positively to the job security and mortgage rate components.

When asked to describe their feeling about the housing market, consumers became much more pessimistic, however, with 82% reporting that it’s a “bad time to buy” a home. This is a record high, up from 78% in June and above the last all-time high in October 2022.

“While consumers are reporting confidence in the components related to their personal financial situations, it’s unlikely we’ll see housing sentiment catch up to other broader economic confidence measures until there is meaningful improvement to home purchase affordability,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. 

Affordability is currently worse than during the 2008 financial crisis.

Adam Kobeissi, editor-in-chief of The Kobeissi Letter, told Fox that the circumstances are different because of a lack of inventory.

Home prices sank thanks to low demand during 2008, causing the bubble to burst and the market to collapse. But demand remains incredibly high this year, even as prices and rates put pressure on buyers.

“This time around it’s been the exact opposite, and it’s not because of a lack of demand, but because of abundant demand – it’s because of lack of supply,” he said.

 “So basically, what it means for consumers is we don’t think the housing market is going to have a substantial drought anytime soon.”

But if stock shortages linger and home prices keep climbing, it’s unclear how many Americans will be forced out of the housing market despite their desire to buy.

Survey respondents cited high home prices and mortgage rates as the reason for their pessimism, and largely believe prices are only going to get worse. The net share of people who expect home prices to increase in the next year rose by 6% month-over-month and has been on the rise since March.

Unless rates come down, homeowners likely won’t rush to sell their houses even if prices soar to new heights.

“[W]e have not seen much movement in the ‘good time to sell’ component over the last few months, an indication that the current low levels of existing homes for sale will likely continue to persist in the near term, as also reflected in our latest forecast,” Duncan added.

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