Homebuyers are a little more hopeful of lower mortgage rates. Fannie Mae Home Buying Sentiment Indexhas rebounded slightly from its all-time low in October. The data comes from a survey of nearly 1,000 homeowners and renters who asked over 100 questions about their attitudes toward homebuying and the economy.
FRB shows that: Moderate interest rate hikes underway With December data pointing to a slowdown in inflation, interest rates could even come to a halt once they reach just over 5%. Meanwhile, many markets are already shifting to buyers. Sellers who offer more concessionsand the Case-Shiller Index House prices are falling month by month, but are still rising compared to a year ago. More prospective homebuyers are betting that the affordability crisis will ease, perhaps as a result of these changes. may rise.
More respondents believe now is a good time to buy
When home buying sentiment was at its lowest, only 16% of respondents thought it was a good time to buy a home. But in December 2022, 21% of her respondents said it would be a good time to buy a property. Meanwhile, the percentage of respondents who said now is not the time to buy dropped from 79% for him to 76% for him in December.
redfin report There are early signs of improving homebuying sentiment. Both home tour applications and mortgage purchase applications have increased since October. Falling mortgage rates have lowered the average homebuyer’s mortgage rate by nearly $300, making it possible for more families to buy homes. However, increased demand has yet to translate into pending home sales.
Does the rise in the homebuying sentiment index reflect market conditions, or are homebuyers simply relieved that mortgage payments have become more affordable? The availability of payments by itself does not indicate a wise time to invest. It’s usually best to invest when inventory is plentiful and home prices are at their lowest. If you can get a low mortgage rate at the same time, that’s the icing on the cake. But of course, low mortgage rates can increase demand for homes and push prices up. Likewise, if most homeowners believe prices have bottomed and they decide it’s a good time to enter the market, prices could rise.
Analysts at Top Companies Agree Home prices are still trending downward However, as homebuying confidence grows, demand could serve as a floor for price declines and even cause prices to rise.On the other hand, most economists I don’t think the Fed will cut rates By the end of 2023, mortgage affordability remains an issue for prospective home buyers.
The best time to buy may be in the future, but whether prospective homebuyers should wait depends a lot on location. For example, Chen Zhao, Redfin’s chief economic researcher, said: To tell In some cities, like San Francisco and Austin, prices have already fallen over the past year. Now may be the right time to act in these markets, as prices may turn around as demand recovers.
Fewer respondents think it’s a good time to sell
The shift towards a buyer’s market is also reflected in seller sentiment. His 51% of homeowners believe now is a good time to sell, up from 54% of him in November 2022. By contrast, in December 2021, 76% of respondents say now is a good time to sell. The percentage of homeowners who said it was a bad time to sell their home also increased from 39% in November to 42% in December.
Most sellers probably want to time travel to a time when mortgage rates were low and demand was very high.At that point, sellers could expect multiple over-the-top offers. Now, many sellers are offering to buy at mortgage interest rates or lowering listing prices as homes. stay in the market longerNot an ideal time to move, especially since home sellers face high mortgage rates on new properties. However, sellers who can wait to sell can expect a projected recovery and more affordable prices in 2024 or 2025.
More respondents expect lower mortgage rates and home prices
Thirty percent of respondents said house prices will rise over the next 12 months, unchanged from November, while 37 percent of respondents expect prices to fall, up from 34 percent in November. are doing. Meanwhile, 29% of her respondents expect prices to remain unchanged, down from 30% in November. The split in consumer expectations may be due, in part, to differences in home price forecasts in different markets.
The share of respondents who expected mortgage rates to fall within the next 12 months increased from 10% to 14%, while the share of respondents who expected mortgage rates to rise further rose from 62% to 51%. Decreased. Thirty-one percent of her respondents expect mortgage rates to remain unchanged over the next year. In this case, many economists are also divided. for example, Lucifer We expect the Fed to cut the Federal Funds Rate in 2023, which will lower mortgage rates.But goldman sachs We expect no rate cuts until 2024.
Increased confidence in work
The civilian unemployment rate is 3.5% in Decemberdown slightly from 3.7% in November. job gain The hospitality and healthcare sectors were significant, while the declining industries showed little change. Consumer sentiment reflects a strong job market. The Home Buying Sentiment Index revealed that 82% of respondents were not worried about unemployment, up from 78% in November. Meanwhile, the proportion worried about losing his job has dropped from 21% to 17%. Yet many economists cause for concern that the unemployment rate will rise.
why it matters
The Fannie Mae Home Buying Sentiment Index rose only 3.7 points in December, just above its all-time low of 61 points. Consumers are not as fond of buying homes as they were in the first half of 2022. For example, the Home Buying Sentiment Index rose slightly. May 2020,One month ago Sale of existing homes It started to rebound.
Recovery means trouble for homebuyers
If prospects who previously decided to wait are now more confident, it could mean a slight rebound in demand. means new competition for If homebuyer sentiment builds high enough, the bidding wars that became commonplace during the pandemic could recur, pushing home prices lower for homebuyers at a time when mortgage rates remain relatively high. may be out of reach of
Nonetheless, the outlook for the housing market remains uncertain.Investor expectations are rising The Fed may achieve a soft landingBut if unemployment rises and consumer spending recedes, the U.S. could still slip into a recession. In fact, the economist now puts him at a 70% chance of a recession in 2023, up from the previous month. Bloomberg poll.
That uncertainty could divide prospective homebuyers. Some will rush back into the market as mortgage rates become more affordable, while others will be more cautious in anticipation of future price declines. Gender may be partially determined.
Uniquely recognizing that the market has bottomed out is an ideal situation for individual homebuyers. That individual can buy without competition and get the lowest price. The problem is that most market metrics accessible to individual homebuyers are also available to everyone else.
It’s important to use as much data as possible to help investors stay ahead of the curb. If you can buck the trend and buy just before it becomes popular again, you can make a profit. The Home Buying Sentiment Index is just one indicator of demand, and so far its rise has had no impact on sales activity. But as an early indicator, it’s important to pay attention, especially in markets that have cooled rapidly.
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Note by BiggerPockets: These are opinions written by the authors and do not necessarily represent the opinions of BiggerPockets.
