According to prospective homebuyers, it’s never been a worse time to try and purchase a place.
Only 17 percent claimed it was a good time to buy a home in May, according to Fannie Mae’s Home Purchase Sentiment Index. The figure, down from 19 percent in April and 24 percent in March, marked the third straight month the index component reached a record low.
The overall index is down 11.8 points year over year. The index stood at 68.2 points in May after hitting a pandemic low of 63 points in April 2020.
The index is based on six survey questions and answers compiled by Fannie Mae from approximately 1,000 respondents reached for live telephone interviews.
Doug Duncan, chief economist at Fannie Mae, in a statement pointed to increased mortgage rates, high home prices and inflation as factors squeezing would-be homebuyers.
The net share of respondents who said they weren’t concerned about losing their job dropped 8 percentage points from April, though 81 percent responded they were unconcerned.
Additionally, the share of respondents who said their household income was significantly lower than a year ago increased from 14 percent to 16 percent, while those who said their household income was significantly higher remained the same.
While buyers are feeling the pinch, sellers are still feeling confident. The percentage of respondents claiming it was a good time to sell increased from 72 percent in April to 76 percent in May. Those respondents were feeding off the high prices, although the question doesn’t address the reality that sellers often need to buy somewhere else.
A factor affecting both buyers and sellers is mortgage rates, which have been rising ever since the Federal Reserve increased its rates. Last week, demand for mortgages hit a 22-year low.
Only 4 percent of survey respondents thought mortgage rates would decrease in the next year, while 70 percent thought they would go up, down from 73 percent the previous month. Roughly 20 percent of respondents think mortgage rates will hold steady for the next 12 months.
Buyers do have reason for hope. Fannie Mae economists recently projected the appreciation of home prices would slow down. Price appreciation is expected to hit single digits next year and fall to 3.2 percent by the fourth quarter of 2023.
The economists also believe a “meaningful slowdown” is on the way for home sales, forecasting 6.1 million sales this year. That would be an 11.1 percent decline from last year.