A combination of rising home prices, higher mortgage rates and general economic concerns seem to be restraining Americans from taking part in the spring and summer home-buying season.
In May, 68% of Americans thought it was a good time to buy a home, while 43% thought it was a good time to sell, according to survey results released by mortgage giant Fannie Mae. That net 25% advantage in favor of home buying was the lowest it’s been since at least June 2010, the earliest month for which Fannie has data.
To be sure, the tightening spread could indicate that some level of balance is returning to the home market. Since Fannie Mae started the survey in June 2010, the percentage who thought it was a good time to buy has increased by 29 percentage points.
But over the past year, most of the tightening in the spread has come to waning buyer enthusiasm. Since May 2013, the percentage of respondents who thought it was a good time to buy has fallen eight percentage points, while the percentage who said it was a good time to sell increased three percentage points.
The tempered buyer enthusiasm probably reflects a confluence of factors tilting the housing market against them. The clearest: Home prices have increased significantly in the last 12 months, especially in certain hot housing markets. Between April 2013 and April 2014, the median national price for an existing single-family home rose 4.7% to $201,100, according to the National Association of Realtors.
In the same period, rates on 30-year fixed-rate mortgages have risen about 0.7 percentage point to 4.14%, according to Freddie Mac. And that’s only if you qualify. Although mortgage lending has loosened since the depths of the financial crisis, lenders are nowhere near as forgiving as they were during the housing boom.
In the meantime, potential buyers’ income expectations are stagnant. About 57% said they think the economy is headed in the wrong direction and about 21% said their household income has increased significantly in the last year, four percentage points less than in April.
That’s not to say that diminished optimism is necessarily a bad thing. Few thought that the rapid price increases of the past year could continue at such a torrid pace.
Americans don’t expect home prices to drop, according to the Fannie Mae survey. In May, respondents said they expect home prices to rise by 2.9% over the next year, the same as they predicted in April.
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10 June 2014 | 1:49 pm – Source: blogs.wsj.com