- Fewer potential buyers think now is good time to buy
- Competition for housing continues to be tight
Sentiment at Record Low in Fannie’s Home Purchase Sentiment Index
Potential homebuyers are becoming increasingly pessimistic about home buying these days.
According to Fannie Mae’s monthly Home Purchase Sentiment Index, the share of potential homebuyers who said that now was a good time to buy a house in response to Fannie’s latest survey fell from 53% to 47%.
Conversely, 48% of survey respondents, up from 40%, said that now was a bad time to buy.
These percentages indicate more pessimism about home buying than at any other time in the 10-year history of Fannie Mae’s homebuyers’ sentiment index.
Likely Causes of Drop in Home Purchase Sentiment
Buying a home is stressful under any circumstance. Buying a home during a time when the supply of for-sale homes stands at a record low and home prices are increasing at the fastest pace in almost two decades makes home buying even more stressful.
On top of record low supplies and skyrocketing home prices, home builders are frankly slow in building new supply.
Doug Duncan, senior vice president and chief economist with Fannie Mae, said, “The decrease in home buying sentiment likely indicates that some consumers, potentially flush with savings – perhaps boosted in part by stimulus payments – may be attempting, but failing, to buy a home due to heightened competition for relatively few listed homes.”
Which Consumers the Most Pessimistic?
Consumers with incomes ranging between $50,000 – $100,000 are the most pessimistic about buying a house at this point in time.
Why? Because the short supply of lower-end, more affordable housing is the most severe. Simply put, there is a dearth of lower-end housing and consumers can’t find homes they can actually afford.
Competition to Buy Hitting Record Levels
According to Redfin, during the four-week period that ended May 2, it took an average of 19 days to sell a home. This “sell-time” of 19 days is the fastest sell-time in Redfin’s nine-year history of tracking days on the market or DOM data.
The average DOM “sell-time” was 35 days during this same timeframe last year.
Additionally, Redfin found that 45% of for-sale homes went under contract in less than one week.
Sale Prices Also Hit Record Level
During the four-week timeframe that ended May 2, Redfin found that 48% of homes sold for more than their list price. This 48% is up a full +20% from the same timeframe one year ago.
Obviously, high competition due to bidding wars has spurred home prices to increase more than +11% from one year ago. Even nearly record low interest rates aren’t helping as they are only helping consumers pay those high prices.
New Home Construction Also Seeing Rising Prices
According to Daryl Fairweather, Redfin’s Chief Economist, “Lumber prices are surging, which has driven up prices of new homes and indirectly drives up prices of existing homes.”
Experts estimate that increased lumber prices have added an additional 35% to the cost of new homes.
Thanks to Fannie Mae, Redfin and CNBC.
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