Americans are feeling worse and worse about the housing market.
Survey data released this week by Fannie Mae showed that the share of people who believe it’s a good time to buy a house dropped to a low of 16% in October. (That's the lowest percentage ever recorded by Fannie Mae, though the data has only been tracked since 2010.)
Meanwhile, 80% of the 1,000 surveyed said they believe right now is a bad time to buy a home. For the sake of comparison, back in February the share of Americans who said it was a bad time to buy in a similar Fannie Mae survey was 70%, and 25% said it was a good time to buy.
In October 2020, 60% of people said it was a good time to buy and only 35% said it was a bad time.
The recent pessimism in the market shouldn't come as a surprise. Mortgage rates near 7% mean borrowing costs are simply too high for many people to afford. At the same time, home prices are still 7.5% higher than they were a year ago, according to data from real estate brokerage Redfin. The rapid pace of price growth, however, is slowing.
Cooling housing market, more negotiating power for buyers
In the coming months, Doug Duncan, Fannie Mae senior vice president and chief economist, expects the market to keep cooling. “As continued affordability constraints reduce homebuyer demand, and homeowners become reluctant to sell at potentially reduced prices, we expect home sales to slow even further in the coming months, he said in a news release.
Americans agree with him. Fannie Mae survey data shows that on average, people expect home prices to fall 1.4% over the next 12 months. Back in August, Americans were predicting a much smaller drop of 0.4%.
For those buyers who can still afford it, a quickly cooling housing market could represent a great opportunity. Fewer buyers in the market means less competition for homes, and less competition means sellers should be more likely to cut house list prices.
"Buyers may think it's better to wait out the market, but in reality, there is more opportunity in this market than I have seen in the past five years if buyers approach real estate as a long-term investment,” Salt Lake City real estate agent Michael Perry said in a recent Zillow news release. “If a buyer can purchase today, they have bargaining power, more options and more time to find the right home, instead of being rushed into a purchase they might regret."