A few seasons can make quite a difference as the housing sentiment displays, by falling to its lowest level in a year in October, according to a monthly survey by Fannie Mae. Consumer attitudes towards both buying and selling homes is decreasing, while the former fell the most of all six survey components. Falling by a sizable 5 percentage points resulted in the survey’s second lowest reading in its history.
Though there was much confidence in the U.S. housing market when mortgage rates were relatively low and the economy was soaring, the data provided is a turnaround from last spring. Now, fewer consumers expect prices to rise, reiterating other surveys that also show a drop in the number of those who believe owning a home is a good investment currently. Although home prices are still increasing, those same increases are shrinking each month: it’s fallen below six percent annually for the first time in a year, according to S&P CoreLogic Case-Shiller home price index.
The housing sentiment continued to fall for the past several months, despite the fact that more consumers believe the economy is on the right path. That particular component of the survey reached an new high.
“The contrast between the survey’s findings of weak homebuying sentiment and overall economic optimism mirrors what we’re seeing in the broader economy,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “While economic growth posted the fastest back-to-back pace in four years in the third quarter, residential investment declined for the third consecutive quarter, a first for the current expansion.”
CNBC reports that fewer people are now believing that mortgage rates will fall back to recent lows. Further supporting their beliefs, it is noted that rates continued to rise over the last week, adding pressure on mortgage application volume.
It fell to the lowest level last week in four years, while rates hit an eight-year high. Not only are potential buyers faced with diminishing affordability, but there are also very few entry-level homes for sale. Though supplies are finally rising for the first time in more than a year, they are coming off near-record lows, so there is still not a wide variety to choose from. Adding further insult to the supply injury as mortgage rates rise, fewer homeowners many desire to list their properties for sales.
“Who wants to give up a mortgage with a 3 handle on it?,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group, as he referenced interest rates at or near 3 percent.