House prices are starting to fall, but not enough to brighten pessimism about the housing market.
fannie maeThe US Home Buying Sentiment Index (HPSI), which tracks consumer confidence in the housing market and home buying and selling, fell 0.8 points to 62 in August, marking its sixth straight decline. Government-backed businesses blame rising home prices and mortgage rates for the fall, weighing on sentiment in home sales in particular.
On the seller side, 35% say it’s a bad time to sell, up from 27% in July. About 59% say it’s a good time to sell, down from 67% the previous month.
“The proportion of consumers who expect home prices to fall over the next year increased significantly in August. said Doug Duncan, senior vice president and chief economist at Fannie Mae.
After a slowdown in house price gains, July prices fell 0.77% from June, marking the biggest one-month decline in the housing market since January 2011. Black KnightAbout 85% of the major housing markets, mainly on the West Coast, have seen prices come down from their peak levels, and further price corrections are expected across the United States.
Duncan said, “We also observed a significant drop in the number of consumers who said that rising home prices were the main reason they were looking to sell their homes. It suggests that it’s starting to have a negative impact,” he said.
On the other hand, falling home prices are welcome news for potential first-time home buyers who are disproportionately affected by rising home prices and high mortgage rates.
Overall, 22% of respondents say August is a good time to buy a home, up from 17% the previous month.
Consumers were less than optimistic about mortgage rates. About 11% of respondents said that mortgage rates will go down over the next 12 months, and 61% said they will go up.
Mortgage rates have trended higher in recent weeks ahead of a possible rate hike by the Federal Reserve later this month. Mortgage purchase rates rose to an average of 5.89% this week.
“Home prices are expected to moderate over the forecast period, and heightened economic uncertainty may incentivize both home buyers and home sellers to stay on the sidelines. Interest rates – will contribute to further cooling in home sales through the end of the year,” Duncan said.
Goldman Sachs, in a paper entitled “The Housing Downturn: Further to Fall,” predicts that new home sales and existing home sales will fall by 22% and 17%, respectively, this year. Next year, investment forecast new and existing home sales to fall another 8% and 14%.