For all the recent talk about a possible interest rate easing in 2024 and the low likelihood of a severe recession, people are still feeling pessimistic. The Fannie Mae Home Purchase Sentiment Index for November is out, and it paints a general picture of low confidence among both homebuyers and home sellers.
As interest rates began to climb in 2022, consumer confidence in the housing market began to plummet, reaching their lowest levels by late 2022. Confidence stabilized somewhat in 2023 but quickly reached what Fannie Mae is calling a ‘‘low-level plateau.’’
Fannie Mae measures home purchase sentiment by collecting data from its questionnaire. The questionnaire, which uses responses from 1,000 adults (aged 18-plus) who are household decision-makers, has several components, including people’s perceptions of whether right now is a good time to buy or sell, concerns about the job market, and expectations about interest rates.
Economic Uncertainty Means a Muted Outlook
The November result is not encouraging for real estate investors. While the mood is not quite as gloomy as it was last year—the overall index is up 7 points year over year—there clearly is a long way to go before consumer confidence in the housing market is restored in any meaningful way.
The most stark figure in the index is the meager 14% of respondents who believe that now is a good time to buy a home, which is a new survey low. This incredibly low number is, of course, tied in with respondents’ increasingly downbeat expectations about the interest rate trajectory, as well as their own purchasing power, as unemployment continues to climb and the economic outlook remains uncertain.
Doug Duncan, Fannie Mae senior vice president and chief economist, points out in a news release that at the end of last year, as interest rates reached 7%, ‘‘a rate level not seen in over a decade, a plurality of consumers said they expected home prices to decrease;…