It is tough to be a homebuyer today. The supply of homes for sale is at a record low, homebuilders are slow to step up and prices are rising at the fastest pace in nearly two decades.
No wonder sentiment among homebuyers fell to the lowest level in the 10-year history of Fannie Mae’s monthly Home Purchase Sentiment Index.
The percentage of respondents who said it is a good time to buy a home decreased from 53% to 47%, while the percentage who said it is a bad time to buy increased from 40% to 48%.
Respondents to the survey largely cited high prices and tight supply as the chief reasons for their pessimism, according to Doug Duncan, senior vice president and chief economist at Fannie Mae.
“The decrease in homebuying sentiment likely indicates that some consumers, potentially flush with savings – perhaps boosted in part by stimulus payments – may be attempting, but failing, to buy a home due to heightened competition for relatively few listed homes,” Duncan said.
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Consumers with incomes between $50,000 and $100,000 were particularly pessimistic. This is because the shortage of homes for sale is most acute on the lower end of the market, so affordable housing is increasingly difficult to find. (The median household income in the U.S. was nearly $69,000 in 2019.)
Competition for housing does not appear to be letting up at all. In fact, competition is hitting record levels.
It took an average of 19 days to sell a home during the four-week period ended May 2, according to Redfin, a real estate brokerage. That’s the fastest since it began tracking that metric in 2012. It is down from an average of 35 days during the same period one year ago. About 45% of homes for sale went under contract in less than a week.
In another record, 48% of homes sold for more than their list price, up 20 percentage points from the same period a year earlier.
Home prices are up more than 11% from a year ago, due to high competition that is resulting in bidding wars. Low mortgage rates are no longer helping much, because they helped to fuel those high prices. Prices are also rising for new construction, as builder costs are soaring.
“Right now we are seeing a substantial increase in home prices, which could be a precursor to more widespread inflation throughout the economy,” said Daryl Fairweather, chief economist at Redfin. “Lumber prices are surging, which has driven up prices of new homes and indirectly drives up prices of existing homes.”
Fairweather also notes that as states lift their Covid pandemic restrictions, there could be price increases in other sectors, from food to gasoline. That would cut into a homebuyer’s budget and might ease competition for housing.
“A more balanced market could encourage more move-up homeowners to finally sell, because they won’t be so fearful about being able to find and compete for a home to buy,” she added.
