Consumer Confidence in Housing Hits Record Low

Consumer confidence in the housing market continues to fall as rates continue to climb making affordability worse, according to the latest data from Fannie Mae.

M-O-M: The Fannie Mae Home Purchase Sentiment Index decreased 4.1 points in October to 56.7, its eighth consecutive monthly decline and the lowest reading since the index’s inception in 2011.

Y-O-Y: The index is down 18.8 points from the same time one year ago.

Barely A Sellers Market. A majority of respondents still believe it is a good time to sell, but just barely. Those who think it is a good time to sell fell 8 percentage points to 51.0% in October. Meanwhile, The percentage of respondents who say it is a good time to buy continues to fall with a three percentage point drop to 16% in October.

• Those who believe it is a bad time to buy jumped up to 80% while those who believe it is a bad time to sell increased by 9 percentage points to 42%.

Rising Rates & Prices. Consumers are pretty certain that mortgage rates are going to continue moving up for the next 12 months and, interestingly, a plurality also believe home prices will keep moving up during that same period.

• Rates: An overwhelming majority, 64% to be exact, believe mortgage rates will rise in the next twelve months with just 6% believing rates will fall.

• Prices: Consumers are much less certain about. 37% of respondents believe home prices will increase, 30% believe home prices will decrease, and 26% believe prices will remain unchanged.

Analysis. Doug Duncan, Fannie Mae economist, believes that higher rates with falling prices mean fewer home sales. “As continued affordability constraints reduce homebuyer demand, and homeowners become reluctant to sell at potentially reduced prices, we expect home sales to slow even further in the coming months, consistent with our forecast.”