Consumer Confidence the Lowest Since 2011

Factors Affecting Buyer and Seller Confidence

Prospective buyers and sellers in the housing market are feeling very pessimistic, according to the survey conducted by Fannie Mae. Only 17% of buyers think it is a good time to buy a home. On the other hand, the number of optimistic sellers is much higher but very worrying. In just a month, the number of optimistic sellers dropped by around 10% - from 76% in May to 67% in July.

The overall index is as low as 62.8 - down 13 points in just a year, and was only lower in 2011. The index that estimates consumer confidence in the housing market hit an all-time high in the summer of 2019. The index was fluctuating but high during the last two years. However, since the rates started skyrocketing, the index has been falling. Fannie Mae calculates the Home Purchase Sentiment Index by taking into consideration six factors:

1. Buying conditions
2. Selling conditions
3. Home price outlook
4. Mortgage rate outlook
5. Job loss concern
6. Change in household income

Perception of home buying and selling is majorly affected by rising rates and prices. The number of people thinking that the prices might fall is rising, although still, more than 50% of respondents believe in price jumps. The rates, however, are leaving rarely anyone optimistic.

After the monthly mortgage rate on a 30-year-fixed loan jumped above 6% in June, it has climbed down to a still-high 5.5%. This decline did not reassure consumers, and the survey showed precisely that - 67% of respondents expected the rates to increase. Homeownership is still a necessity and one step towards building wealth. That is why mid-range houses are not suffering that kind of demand lack as high-end properties.

“The HPSI has declined steadily for much of the year, as higher mortgage rates continue to take a toll on housing affordability,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.

“Additionally, consumers appear to be indicating that selling conditions are softening, as the ‘Good Time to Sell’ component has declined meaningfully over the past two months, and, on net, fewer consumers expect home prices to go up,” he said, and added that “some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential homebuyers may choose to postpone their purchase decision believing that home prices may drop.”