Housing Sentiment Sinks Closer To All-Time Low

Homebuyers and sellers were feeling pessimistic about the market last month due to affordability and job security concerns.

Leaders at Fannie Mae said the Home Purchase Sentiment Index fell by 3.6 points in February, breaking three straight months of increases and pushing the index closer to a record low recorded last October.

“The decline was partly driven by a substantial decrease in consumers’ sense of home-selling conditions, with most respondents who indicated it’s a ‘bad time to sell’ citing unfavorable economic conditions and mortgage rates as the primary reasons for that belief,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.

“With home-selling sentiment now lower than it was pre-pandemic – and homebuying sentiment remaining near its all-time low – consumers on both sides of the transaction appear to be feeling cautious about the housing market.”

Four of the index’s six components declined from January, including both the job security and home-selling conditions measures.

In February, 44% of consumers thought it was a bad time to sell a home, and 24% were worried about losing their job in the next six months, both up from January.

The share of respondents who think it’s a good time to buy did increase, however, seeing a boost from 17% to 20% month-over-month. But the share of respondents who say it’s a bad time to buy also rose, to 82% from 79%.

Overall, the net share went to good-time-to-buyers, reflecting some optimism that a buyer’s market is on the way.

Stock shortages need to correct before buyers can truly take the reigns.

Net new listings are down as homeowners with low-interest rates locked in decide to stay longer in their houses. Last week, mortgage purchase demand fell for a third time as rates hit their highest point since November.

Homeowner tenure has risen for the last several decades, adding to stock shortages. More than a third of baby boomers have stayed in the same home for more than 33 years. As a result, builders have seen their orders increase even as the market corrects.

As a result, competition is still high, especially in relatively affordable places. Lower-income and first-time buyers are most affected by this dynamic, as richer, older buyers snap up increasingly expensive houses.

“We’re far from affordability for the masses,” said Nicole Bachaud, senior economist at Zillow Group Inc. “The scales are shifted toward homebuyers with higher incomes and a better financial background. This will be the norm until we get more inventory in the market.”

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