With mortgage rates staying stubbornly high above 6%, home buyers feel a lot more challenged by the housing market — as their budgets shrink they need to factor in more costs for higher interest payments. The typical home buyer’s monthly payment is up $350 from a year ago, according to real-estate brokerage Redfin.
Home sellers felt as though it was a moment to seize: 65% of consumers believed it was a good time to sell their home, compared to 62% in April. The component is at the highest level since last July, Fannie Mae noted.
One big reason for sellers’ confidence: The low inventory of homes for sale is pushing up home prices. That’s good for sellers, but makes homeownership a very expensive proposition.
On the other hand, consumers feel like it’s an inopportune time to buy a home. The monthly Fannie Mae Home Purchase Sentiment Index fell in May, and is nearing its survey low. In May, 19% of consumers said it was a good time to buy a home, compared to 23% last month.
“Affordability hurdles, including high home prices and mortgage rates, remain top of mind for consumers,” Mark Palim, vice president and deputy chief economist at Fannie Mae, said in a statement.
Consumers were also pessimistic about future plans to buy a home, he added. The respondents to the survey “indicated that they don’t expect these affordability constraints to improve in the near future, with significant majorities thinking that both home prices and mortgage rates will either increase or remain the same over the next year,” Palim said.
Consumers expect mortgage rates and home prices to rise
Aspiring homeowners expected mortgage rates to rise, as well as home prices, according to the survey.
The share of consumers who believe home prices will go up over the next year rose in May to 39% from 37%, Fannie Mae said. This is the second month in a row that consumers forecast home prices to go up.
And the share of respondents who believe rates will fall over the next year fell to 19% from 22% the previous month. The average 30-year mortgage rate was 6.81% in early June, which is double and even triple where rates were during the pandemic.