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Mortgage rates are at the lowest level in two months, but consumers still think it’s a bad time to buy a home, according to a new report.
Fannie Mae’s
FNMA,
Home Purchase Sentiment Index, released Friday, fell by 3.3 points in March to 61.3, which is only slightly above an all-time low set late last year.
“With the spring homebuying season now upon us, a large majority of consumers continue to believe that it’s a bad time to buy a home,” Mark Palim, vice president and deputy chief economist at Fannie Mae, said in a statement.
“Homeowners sharing this belief frequently cited ‘unfavorable mortgage rates’ as the primary reason for their pessimism, further corroborating the often-discussed disincentive — or ‘lock-in effect’ — that many mortgage holders who may be considering moving have toward giving up their lower rates,” he added.
“Giving up a 3% mortgage rate for one in the 6% range is a tough pill to swallow,” Taylor Marr, deputy chief economist at Redfin
RDFN,
said in the report. Sales are subsequently down because “buyers can’t buy if sellers don’t want to sell,” he added.
Low inventory is dragging the housing market, as few sellers are willing to give up low rates, hence pushing the number of new listings on the market down. On Thursday, Redfin said that new listings fell 21.8% from a year earlier for the four weeks ending April 2. The drop is one of the biggest since the start of the pandemic.
Renters, on the other hand, were more concerned with high home prices as a barrier to homeownership, Palim added.
The share of respondents who said it was a bad time to buy a home was 79%, unchanged from the previous month. Only 20% of respondents said it was a good time to buy.
On the sellers’ side, more respondents said it was a good time to sell a home, rising to 58% from 54%. The share of respondents who said it’s a bad time to buy a home fell by 4 percentage points.
Consumers were less certain about the direction of mortgage rates and home prices.
Americans expect mortgage rates to rise above 8% in the next 12 months according to a separate New York Federal Reserve survey. But respondents to the Fannie Mae survey weren’t on the same page: Respondents who said they expect rates to go down over the next year fell to 12% from 15% last month, yet the share who believed rates will go up also fell, to 51% from 55%.
The 30-year fixed rate mortgage was averaging at 6.28% as of Thursday, Freddie Mac
FMCC,
said in a separate report. Mortgage News Daily put that number at 6.18%.
Respondents were also mixed about the direction of home prices. More survey participants also believed that home prices will go up in the next 12 months, rising to 32% from 30% the previous month. Yet the share of respondents who expect prices to come down fell to 31% from 35% the previous month.
“Unsurprisingly, consumers also expressed apprehension about the direction of home prices. In March, there was an even split among respondents who said home prices over the next 12 months will go up compared to those who expect them to go down,” Palim said.
“With affordability constraints, the lock-in effect, and home price direction uncertainty weighing heavily on consumers’ minds, we maintain our forecast that total home sales for the year will remain subdued,” he added.
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