A potential home buyer reviews paperwork at an open house in Columbus, Ohio.
Ty Wright | Bloomberg | Getty images
It is difficult to be a home buyer these days. The supply of homes for sale is at a record low, homebuilders are slow to grow and prices are rising at the fastest pace in nearly two decades.
No wonder homebuyer sentiment fell to the lowest level in the 10-year history of Fannie Mae’s monthly Home Purchase Sentiment Index (HPSI).
The percentage of respondents who said it is a good time to buy a home has decreased from 53% to 47%, while the percentage who say it is a bad time to buy a home has increased from 40% to 48%.
According to Doug Duncan, senior vice president and chief economist at Fannie Mae, respondents cited high prices and tight supply as the main reasons for their pessimism.
“The decline in home-buying sentiment likely indicates that some consumers, who may be spared – perhaps spurred in part by stimulus payments – may try, but fail, to buy a home due to increased competition for relatively low prices. few listed houses, ”said Duncan.
Consumers with incomes between $ 50,000 and $ 100,000 were especially pessimistic. This is because the shortage of owner-occupied homes is most acute at the bottom of the market, making affordable homes increasingly difficult to find. (The median household income in the US was nearly $ 69,000 in 2019.)
The competition for housing does not seem to stop at all. In fact, the competition is reaching record levels.
According to Redfin, a real estate agency, it took an average of 19 days to sell a home during the four-week period ending May 2. That’s the fastest since they started tracking that statistic in 2012. It is lower than an average of 35 days in the same period a year ago. About 45% of the homes for sale were contracted within a week.
In another record, 48% of homes were sold for more than list price, up 20 percentage points from the same period a year earlier.
House prices are up more than 11% from a year ago, due to fierce competition resulting in bidding wars. Low mortgage rates don’t help much anymore, as they have helped fuel those high prices. Prices for new construction are also on the rise as construction costs soar.
“Right now we are seeing a significant rise in house prices, which could be a precursor to more widespread inflation across the economy,” said Daryl Fairweather, chief economist at Redfin. “Wood prices are on the rise, which has pushed up the prices of new homes and indirectly pushed up the prices of existing homes.”
Fairweather also notes that as states lift their pandemic restrictions, there could be price increases in other industries, from food to gasoline. That would cut a home buyer’s budget and reduce competition for housing.
“A more balanced market could encourage more homeowners to finally sell because they won’t be so afraid of finding a home to buy,” she added.