Fannie Mae’s latest monthly national housing survey reveals an interesting contradiction.
Last month, 39% of respondents to a new poll said they expected mortgage rates to fall over the next 12 months.
At the same time, fewer people expect house prices to rise over the same period, and more people expect house prices to fall.
Although buying a home has become more expensive thanks to lower interest rates, consumers do not believe prices will rise.
What does this say about the demand for home buyers as mortgage rates fall?
But we’re told bidding wars will return when mortgage rates fall.
Fannie Mae Monthly Home Buyer Confidence Index (HPSI) It has increased very slightly. (0.6 points) to 72.1 in August compared to the previous month.
But it remains very low, with most of the 1,000 respondents saying now is not a good time to buy, and increasingly a bad time to sell.
Just 17% said August was a “good time” to buy a home, which has been relatively flat for several months and remains just above the survey’s all-time low.
Meanwhile, 83% said it was a “bad time” to buy a home, the highest percentage since the survey began.
Meanwhile, only 65% said it was a good time to sell, while 34% said it was a bad time. Since August 2021, the “pure right time” to sell has dropped from 54% to just 31%.
It seems that no one is happy with the current state of the housing market, which continues to be characterized by a mismatch between buyers and sellers.
Sellers are told they are not being realistic about what they are asking for, and buyers say the prices are too high. But no one budges.
There is also a shortage of stock in most markets, so there is little to choose from and often not what a potential buyer is looking for.
Overall, we have seen a significant decline in home sales, especially when we take into account the impact of the ongoing mortgage rate lock-in.
It’s also strange to see this sentiment in light of the narrative we’ve been hearing for some time that the housing market will go crazy when mortgage rates fall.
Well, it’s down from about 8% a year ago to just over 6% at last look. You’d think that would be enough to get things moving.
It’s the economy (and maybe high housing prices too!)
As I wrote last week, the story is no longer about mortgage rates. Most consumers are in favor of lower interest rates.
However, they also say that this is not the ideal time to buy. So, you will have to look elsewhere for the answer.
Are home prices too high, even with mortgage rates down about 2% from their peak a year ago?
Or is the economy becoming a growing concern, with the Fed entering a recession, expecting to cut interest rates significantly over the next year and change?
Most consumers surveyed by Fannie Mae said they were not worried about losing their jobs (78%), down from 82% in 2021 but still high.
But respondents were more pessimistic about their household income than last year, with more saying it was “much lower” rather than “much higher.”
This may also reflect the purchasing power of their dollars, which has been eroded by inflation that has affected almost everything.
So you start to wonder if consumer expectations are deteriorating as the economy shows signs of slowing down, while unemployment rates rise.
This is more important than interest rates. It really explains why there is no inverse relationship between mortgage rates and house prices.
If mortgage rates are expected to fall due to slowing economic conditions, wouldn’t you argue that home price growth might also fall?
I have argued that house prices and interest rates can fall in tandem with this reason, although nominal declines are rare.
But at least that belies the idea that homebuyers go crazy when prices drop. Of course, prices have fallen during the slower part of the year. They are still significantly higher than they were in early 2022.
We may then need prices to continue to decline until the home buying season comes in the spring of 2025.
Then we will have a better idea of where the housing market is heading next.
Prior to creating this site, I worked as an account manager for a wholesale mortgage lender in Los Angeles. My experience working in the early 2000s inspired me to start writing about mortgages 18 years ago to help potential (and current) home buyers better navigate the home loan process. Follow me on Twitter for the latest news.
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