Over 80% of Americans say it’s a bad time to buy a house, blaming high prices and economic uncertainty

Americans are unsure about where the housing market is heading but are certain about the challenges of buying a home right now.

According to the Fannie Mae Home Purchase Sentiment Index (HPSI), nearly 80% of Americans believe it’s a bad time to buy a home. The index remained unchanged in April compared to the previous month as consumers adjust to high mortgage rates, which show little signs of easing. Last week, the average rate for a 30-year mortgage was 7.22%. Consumer confidence, however, has increased by 8% year-over-year.

Moreover, fewer Americans expect mortgage rates to decrease over the next year, leaving potential buyers waiting for more affordable conditions.

“Housing sentiment increased from November through February, driven largely by consumer belief that mortgage rates would move lower,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist. “However, recent data showing stickier-than-expected inflation, rising mortgage rates, and continued home price appreciation appear to have given consumers pause regarding the market’s direction.”

A Closer Look at Mortgage Rates

The expectation for a rate decrease is becoming less common.

In the most recent survey, only about 1 in 4 Americans believe rates will fall in the next 12 months, a drop from nearly 1 in 3 a month earlier. At the start of the year, almost 40% of survey respondents had hoped for a decline in rates.

“[Strong economic and job market data] will keep mortgage rates at elevated levels for the near future, sidelining some prospective buyers from entering the housing market,” said Edward Seiler, the Mortgage Bankers Association’s (MBA) associate vice president.

With mortgage rates hovering around 7% for a 30-year loan in recent months, monthly payments have climbed. According to the MBA, the national median payment rose to over $2,200 in March from $2,184 in February. Payments could rise further as the average 30-year mortgage rate has surpassed 7% in the last three weeks, with no signs of falling.

Home Sellers’ Optimism Continues

While homebuyers struggle, more Americans feel confident about selling. In April, nearly 70% of survey respondents believed it was a good time to sell, up from 60% at the start of the year and 62% from the same time last year.

Sellers’ optimism may be linked to the ongoing increase in home prices nationwide. According to the S&P CoreLogic Case-Shiller US National Home Price Index, home prices rose by 6.4% in February.

“As interest rates go up, people’s purchasing power goes down, and thus, so should home prices. But that hasn’t happened in this latest correction cycle,” Jon Grauman, founder of the real estate firm Grauman Rosenfeld in Los Angeles, told Yahoo Finance.

Approximately 1 in 4 Americans now believe rates will drop in the next 12 months, a decline from nearly 1 in 3 the previous month.

Consumers Prepare for Higher Prices

Fewer Americans believe rates will drop, but more are bracing for higher home prices. According to Fannie Mae’s survey, over 40% of respondents expect home prices to increase in the next 12 months, up from 37% earlier this year.

“We think consumers’ generally improved sense of home-selling conditions bodes well for listings and housing activity, particularly for the segment of the population who may need to move for lifestyle reasons and have already begun adjusting their financial expectations to the current mortgage rate and price environment,” Duncan said.

Article is based on the survey done by Fannie Mae Institute.

See the Fannie mae Report from - https://www.fanniemae.com/media/46931/display

See the S&P Global Article fro more - https://www.spglobal.com/spdji/en/index-announcements/article/sp-corelogic-case-shiller-index-s-upward-trend-persists-in-february-2024/