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Fannie Mae: Housing outlook for consumers hits 11-year low

Worries include home affordability, job security

Housing and market uncertainty
(Illustration by The Real Deal with Getty Images)

Home buyers, and some sellers, haven’t been this bummed in years.

Consumers have become more pessimistic about housing than at any time since 2011, when home prices bottomed at the peak of the global financial crisis, Bloomberg reported, citing data from the Federal National Mortgage Association.

Fannie Mae’s Home Purchase Sentiment Index dropped to the lowest level in more than a decade, as consumers expressed pessimism about home buying prospects. The index, which reflects consumers’ views on the housing market, has fallen from 76 to 63 year-over-year.

The consumer housing outlook hasn’t been as bad since the Great Recession, when home values plunged as borrowers struggled to make payments, leaving millions at risk of losing their homes.

This time marks a crisis in housing affordability.

As the Federal Reserve hikes benchmark borrowing costs, rates on 30-year fixed-rate mortgages have almost doubled year-over-year to 5.43 percent in late July compared to 2.97 percent a year earlier.

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This has put home ownership out of reach for more consumers. Sales of new U.S. homes fell to more than a two-year low in June.

“The HPSI has declined steadily for much of the year, as higher mortgage rates continue to take a toll on housing affordability,” Doug Duncan, Fannie Mae senior vice president and chief economist, said in a statement. “Unfavorable mortgage rates have been increasingly cited by consumers as a top reason behind the growing perception that it’s a bad time to buy, as well as sell, a home.”

Four of the index’s six components dropped month-over-month – including views on buying and selling conditions, home-price outlook and job-loss concerns, Fannie Mae said.

Consumers were most concerned about buying conditions, as the sentiment changed the most year-over-year with 76 percent of respondents saying it’s a bad time to buy.

Although home price appreciation has been the story of the year, consumers think the trend is over. Respondents who believe home prices will go up in the next 12 months fell to 39 percent in July, from 44 percent in June, while the percentage who said home prices will go down increased to 30 percent from 27 percent.

— Dana Bartholomew

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Fannie MaeHousing MarketMortgage Rates