According to Fannie Mae, homebuyer sentiment increased slightly from November to December and is currently only marginally higher than the all-time low set in October. Despite sentiment increasing over the last month, 76% of individuals surveyed by Fannie Mae believe that now is a bad time to buy a home, with only 21% believing that now is a good time to make a purchase.
In October, only 16% of respondents in October believed it was an advantageous time to buy. Comparitaviley, nearly 60% of consumers said it was a good time to purchase a property at the beginning of 2020, just before the onset of the Covid pandemic.
Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, explained why homebuyer sentiment remains low in a press release. According to Duncan, the sentiment “remains very low by historical standards, particularly the ‘good time to buy’ component, and respondents continue to cite high home prices and unfavorable mortgage rates as the primary reasons for their pessimism.”
However, Duncan also pointed out that homebuyers were more optimistic in December than during the previous month, as, “consumers reported increased expectations that mortgage rates and home prices may decrease over the next year – perhaps reflecting recently observed declines in mortgage rates and average home prices.”
Several top firms, such as the National Association of Realtors, CoreLogic, and Fannie Mae, recently predicted that there will be no new home growth in 2023 or a small decline of less than 1.0%. The forecasts also agree that mortgage rates will average about 6.5% at the beginning of the year and will end 2023 at around 6.0%. As of January 12, the average 30-year fixed-rate mortgage is 6.33%.
A lack of adequate housing inventory is one reason home prices remain high. The country hasn’t built enough housing supply in recent years to meet the demand. Homeowners are also reluctant to list their homes because they don’t want to purchase a new property with a much higher mortgage rate. Fannie Mae predicts that affordability issues will continue to keep many potential homebuyers out of the market because any drops in sales prices and mortgage rates will be too minimal.
Prospective homebuyers waiting for home prices and mortgage rates to decline before entering the housing market will likely be disappointed by this year’s results. If expert predictions come true, mortgage rates will remain above 6.0% for nearly all of 2023, and home prices won’t change much over the next year. While some markets may see noticeable price declines, buyers shouldn’t expect national prices to decline much, if at all.
