Sentiment in the US housing market fell last month, according to Fannie Mae data. That’s largely due to high mortgage rates, with the 30-year fixed rate rising to 7.49% the last week. Buyers are also expecting home prices to rise over the next year, Fannie Mae’s chief economist said. Loading Something is loading.
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Sentiment in the US housing market deteriorated further last month as borrowing costs continued to rise, according to Fannie Mae.
The Fannie Mae Home Purchase Sentiment Index dropped 2.4 points to 64.5 in September, though it’s 3.7 points above year-ago levels. Among other findings, just 16% of consumers said now is a good time to buy a home, matching the all-time low set last year.
“Mortgage rates persistently over 7 percent appear to be deepening the malaise consumers feel about the home purchase market,” Fannie Mae chief economist Doug Duncan said in a statement. “In fact, high mortgage rates surpassed high home prices as the top reason why consumers think it’s a bad time to buy a home, a survey first.”
Mortgage rates rose last week as Treasury yields surged, with the average 30-year fixed mortgage rate hitting 7.49%, according to Freddie Mac.
In Fannie Mae’s survey, sellers cited high mortgage rates as the number one reason why they thought it was a bad time to sell their homes. That suggests the shortage of housing inventory is likely to drag on, which has helped push up home prices over the past year.
“Consumers are also not seeing much affordability relief in sight, as they continue to expect home prices to increase in the next 12 months. They also indicated that their personal economic situations are showing signs of strain, including lower year-over-year household incomes and a reduced sense of job security,” Duncan added.
Downbeat feelings about the housing market will also continue to weigh down sales activity. Even if the US avoids a recession, the downturn in home sales is likely to last a long time, Fannie Mae said in a previous note.
Meanwhile, housing affordability conditions are about the worst they’ve ever been, according to one Mortgage Bankers Association analysis.
Home prices are now over 40% higher than they were prior to the pandemic — so expensive that the market would need an extreme scenario to return prices back to pre-pandemic levels, according to one industry exec, such as a 55% spike in income, or a 35% crash in property prices.