It’s a Bad Time to Buy a House, According to Basically Everyone

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If you’re in the market to buy a home this summer, well … good luck! Optimism around homebuying just hit a record low.

The Home Purchase Sentiment Index from Fannie Mae, the government-sponsored mortgage company, sunk 2.5 points in May as “consumer attitudes toward homebuying conditions fell markedly, reaching an all-time survey low” according to a report out Friday.

The survey data also show that fewer people believe it’s a good time to sell a home. More specifically, according to the index:

Only 14% of those surveyed said it’s a good time to buy a home, compared to 20% the previous month.

86% said it’s a bad time to a buy a home, up from 79% the previous month.

64% said it’s a good time to sell a home, versus 67% the previous month.

Why people say it’s a bad time to buy a home

It’s been more than three years since the majority of people thought it was a good time to purchase a house in the U.S.

Housing market optimism took a sharp turn south in mid-2021, as prices spiked due to a combination of paltry inventory and frenzied interest in buying during the pandemic. By early 2022, sentiment had soured further after the Federal Reserve launched a series of interest rate hikes that resulted in rising mortgage rates and widespread housing affordability problems.

Fannie Mae reports that as late as October 2020, 60% of people said it was a good time to buy a home. That figure plunged to 28% in July 2021 before dropping to 17% in July 2022 and reaching just 14% in November 2023.

Pessimism has dissipated slightly in recent months, but now that it looks like higher mortgage rates will stick around longer than expected, negativity prevails. As of May, only 14% said it’s a good time to buy, matching the lowest-ever point since Fannie Mae launched the index in 2010.

“While many respondents expressed optimism at the beginning of the year that mortgage rates would decline, that simply hasn’t happened, and current sentiment reflects pent-up frustration with the overall lack of purchase affordability,” Doug Duncan, Fannie Mae senior vice president and chief economist, said in the report.

If there’s something to be positive about regarding the housing market, it’s home equity. After all, many of the same forces causing hardships for homebuyers are largely benefiting homeowners, in the form of rising real estate value.

Owners have seen their home equity rise to record highs this year. The typical home list price has increased 37.5% since 2019, according to Realtor.com, and home equity in cities like Nashville and Los Angeles is up over 50% during this five-year span.

As for aspiring homebuyers, their frustration is justified, but they may catch a break in the coming months. Though Fed hasn’t lowered interest rates as quickly as some would like, most analysts still predict one or more cuts this year. If and when the cuts come, that should nudge mortgage rates lower and offer buyers a little relief.

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