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Consumer confidence in the U.S. housing market has tumbled to the lowest level on record as rapidly rising mortgage rates and high home prices force potential buyers to pull back.
In October, just 16% of consumers said they feel that now is a good time to buy a home, according to a monthly survey by Fannie Mae. The marks the lowest percentage since the survey's inception in 2011.
Americans are also increasingly alarmed about the prospect of selling a home: The share of respondents who think it's a good time to sell fell from 59% to 51%.
"Consumers are increasingly pessimistic about both homebuying and home-selling conditions," Doug Duncan, the chief economist at Fannie Mae, said in a statement. "Amid persistently high home prices and unfavorable mortgage rates, the ‘bad time to buy’ component increased to a new survey high this month, while the ‘good time to sell’ component continued its downward trend,"
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A for sale sign stands in front of a house on Oct. 6, 2020, in Westwood, Massachusetts. (AP Photo/Steven Senne, File / AP Newsroom)
The interest rate-sensitive housing market has borne the brunt of the Federal Reserve's aggressive campaign to tighten policy and slow the economy.
Policymakers already lifted the benchmark federal funds rate six consecutive times – including four 75-basis-point increases in June, July, September and November – and have shown no sign of slowing down as they try to crush inflation that is still running near a 40-year high.
The average rate for a 30-year fixed mortgage climbed to 6.95% for the week ending Nov. 3, according to recent data from mortgage lender Freddie Mac. That is significantly higher than just one year ago when rates stood at 3.09%, though it is down slightly from a 20-year peak of 7.08%.
US Federal Reserve Chair Jerome Powell speaks during a news conference on interest rates, the economy and monetary policy actions, at the Federal Reserve Building in Washington, DC, June 15, 2022. (Photo by OLIVIER DOULIERY/AFP via Getty Images / Getty Images)
Combined with high home prices, the rapid rise in borrowing costs has pushed many entry-level homebuyers out of the market.
A separate report released in October showed that existing home sales slowed for the eighth consecutive month.
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Sales of previously owned homes tumbled 1.5% in September from the previous month to an annual rate of 4.71 million units, according to data from the National Association of Realtors (NAR). On an annual basis, home sales plunged 23.8% in September.
"The housing sector continues to undergo an adjustment due to the continuous rise in interest rates, which eclipsed 6% for 30-year fixed mortgages in September and are now approaching 7%," NAR chief economist Lawrence Yun said. "Expensive regions of the country are especially feeling the pinch and seeing larger declines in sales."