Consumers are showing increased optimism about the future of the housing market, yet confidence in current buying conditions remains low, according to a recent survey by Fannie Mae. Despite a gradual decline in interest rates and a slight decrease in home prices, a significant portion of potential buyers still feels apprehensive.
The survey, released Monday, reveals that only 17% of consumers believe now is a good time to purchase a home. This figure remains stagnant from the previous month and is slightly lower than the same period last year. Mark Palim, vice president and deputy chief economist at Fannie Mae, noted that while there is growing optimism regarding future market conditions, most consumers continue to be deterred by ongoing affordability and supply issues.
Falling Interest Rates and Increased Listings
The housing market has been impacted by high interest rates over the past two years, which have significantly constrained buyer activity. However, recent weeks have seen a decrease in mortgage rates, providing some relief. According to data from Redfin, many homeowners are currently locked into lower mortgage rates, making them less inclined to sell.
Despite this, mortgage rates have been trending downward since May and have fallen consistently for the past three weeks. This decline has started to encourage more homeowners to list their properties. Realtor.com reports that the number of active home listings increased for the tenth consecutive month in August, reaching its highest level since May 2020.
Realtor.com’s senior economist, Joel Berner, highlighted that the drop in mortgage rates allows buyers to afford more expensive homes within their budget and encourages sellers to enter the market.
Potential for Price Adjustments
As the supply of homes for sale grows, there is potential for prices to decrease. Previously, limited inventory led to heightened competition among buyers, driving prices up. Realtor.com notes that the median home price has risen over 36% since July 2019. However, with supply and demand beginning to balance, the median price of homes fell by 1.3% in August compared to the previous year. Additionally, the number of homes reducing their asking prices in August reached the highest level since 2018.
Looking Ahead
While current market conditions are causing hesitation among buyers, there is a notable shift in expectations for the future. Fannie Mae’s survey indicates that nearly 40% of consumers anticipate a decline in mortgage rates over the next year, an increase of 10 percentage points from the previous month. Furthermore, the proportion of individuals expecting home prices to fall also rose to 25% in August, up from 21% in July.
As buyers and sellers navigate the evolving market, the expectation of lower rates and prices could eventually translate into increased confidence and activity in the housing market.
