Americans’ confidence in housing market reaches record low

Consumer confidence in the housing market hit a new low last month as persistently high home prices and rising mortgage rates continued to cool the once hot housing market, according to data released Monday.  

Only 16 percent of buyers in October said they thought it was a good time to buy a home, Fannie Mae’s monthly Home Purchase Sentiment Index (HPSI) revealed. That marked a new low since the index started in 2011. 

“The HPSI reached an all-time survey low this month, in line with expectations that the housing market will continue to cool in the months ahead,” Doug Duncan, Fannie Mae’s senior vice president and chief economist, said in a statement.

“Consumers are increasingly pessimistic about both homebuying and home-selling conditions,” Duncan continued. “Amid persistently high home prices and unfavorable mortgage rates, the ‘bad time to buy’ component increased to a new survey high this month, while the ‘good time to sell’ component continued its downward trend.”

The percentage of buyers who said it was a good time to sell decreased by 8 percentage points to 51 percent. 

Potential homebuyers and sellers face a litany of challenges amid the Federal Reserve’s effort to tamp down growing inflation by raising interest rates, an issue Fed Chair Jerome Powell acknowledged last week after the U.S. central bank’s latest rate hike. 

“Housing is significantly affected by these higher rates, which are really back where they were before the global financial crisis. They’re not historically high, but they’re much higher than they’ve been,” Powell said during a press conference on Wednesday. “We do understand that that’s really where a very big effect of our policies is.” 

The rate increases beginning in March have sent mortgage rates soaring, leaving many buyers on the sidelines as increasing rates make monthly payments unaffordable. Since then, mortgage rates surged by nearly 3 percentage points to around 7 percent. 

Meanwhile, home prices slowed at a record pace in September, falling by 2.6 percent, according to the S&P CoreLogic Case-Shiller index.  

There was also a sharp decline in the number of homes under contract. The forward-looking market indicator fell for the fourth consecutive month in September, dropping by 10.9 percent. 

Economists have argued potential sellers are also reluctant to give up their pandemic-era mortgage rates, which could further reduce availability.