Housing Affordability is Improving, but Buyer Sentiment is Not
Written By: Joel Palmer, Op-Ed Writer
The latest data shows that housing affordability may be slightly improving, but consumer sentiment about the housing market continues to be pessimistic.
Fannie Mae reported earlier this month that its monthly Home Purchase Sentiment Index® (HPSI) decreased in July, with only 17 percent of consumers believing it's a good time to buy a home and 65 percent saying it’s a good time to sell.
In addition, the percentage of respondents who say home prices will go up in the next 12 months decreased from 45 percent to 41 percent, while the percentage who say home prices will go down increased from 17 percent to 21 percent.
Respondents are also optimistic about mortgage rates, with the percentage saying they will go down in the 12 months increasing from 24 percent to 29 percent.
Only 18 percent of respondents say their household income is significantly higher than it was 12 months ago.
"While we're seeing signs that affordability may be improving in certain parts of the country as supply slowly comes online, household incomes remain stretched relative to would-be mortgage or rent payments, and our latest survey once again reflects real consumer frustration with the housing market," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.
"Our recently published Mortgage Understanding Study reaffirmed what we've long known: that a significant majority of consumers want to own a home. Meanwhile, there seems to be little expectation among the general population that homebuying conditions will improve in the near future. More consumers than not see home prices rising further; and slightly more consumers think mortgage rates will increase, rather than decrease, over the next 12 months.”
Duncan added that there’s been a slowly increasing trend of respondents who say they would rent instead of buy the next time they move.
“Right now, it's difficult to tell if this reflects simple buyer fatigue or a greater sense of disenchantment with the market, but we think it could have important implications should the trend continue,” he said.
Fannie Mae is currently forecasting home price growth to decelerate through next year and mortgage rates to average 6.2 percent by the fourth quarter of 2025.
Redfin reported earlier this month that the typical monthly housing payment was $2,588, down $250 from an all-time high in April.
Redfin reported other encouraging signs for today’s buyers, including the total number of homes for sale being up nearly 20 percent year over year. Also, a growing share of inventory is growing stale, allowing some buyers the chance to negotiate. Additionally, less than 30 percent of homes are selling above list price, down from 35 percent a year ago.
Despite declining costs and improving inventory, Redfin said pending home sales are down 5.1 percent year over year, the biggest decline since November. On the plus side, mortgage-purchase applications are up 3 percent week over week on a seasonally adjusted basis.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning
