Economists are officially pessimistic about the housing market. This is the general sentiment following another month of declining home sales. Experts are pointing to a number of factors for the slowdown, including increased interest rates and housing affordability. But the National Association of Realtors’ most recent Housing Opportunities and Market Experience survey hints at a busy spring!
An October 19th NAR news release (nar.realtor) reported that September’s home sales were the weakest in several years. The nationwide trend affected all regions. NAR chief economist Lawrence Yun stated, “This is the lowest existing home sales level since November 2015…A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.”
First-time-home-buyers are finding the housing market increasingly challenging. This segment’s participation needs to be strong for a healthy home sales. September’s low thirty-two percent first-time-home-buyer participation is attributed to rising interest rates and home prices.
But low housing inventory is also an issue. September’s housing inventory decreased to 1.88 million existing homes available for sale (from the 1.91 available during the previous month). NAR President Elizabeth Mendenhall stated, “Despite small month over month increases, the share of firsttime buyers in the market continues to underwhelm because there are simply not enough listings in their price range.”
Economists at Fannie Mae believe that the housing market will continue to disappoint. In an October 18th press release (fanniemae.com) Fannie Mae Chief Economist Doug Duncan stated, “Our expectations for housing have become more pessimistic. Rising interest rates and declining housing sentiment from both consumers and lenders led us to lower our home sales forecast over the duration of 2018 and through 2019. Meanwhile, affordability, especially for first-time homebuyers, remains atop the list of challenges facing the housing market.”
But what do economists really know about the future? Let’s hear it directly from the consumer!
NAR’s Housing Opportunities and Market Experience survey tracks opinions from renters and homeowners about homeownership, economy, and the housing market. The release of their third quarter survey indicates that sixtythree percent of respondents strongly or moderately believe that it’s a good time to buy a home. Although optimism is somewhat diminished from the second quarter’s survey, there continues to be a positive sentiment about buying a home. The survey’s positive sentiment continues even though a majority of respondents believed that home prices will continue to increase in the immediate six months. Additionally, a majority of respondents believe that qualifying for a mortgage may be an obstacle to a home purchase.
The survey also concurs with other metrics indicating high consumer sentiment for the economy. In light of the recent slide in home sales, NAR’s recent Housing Opportunities and Market Experience survey reveals “a near-record high of sixty percent of households believe that the economy is improving.” Adding to the strong sentiment is the survey’s increased monthly Personal Financial Outlook Index, which indicates that respondents believe that their financial situation will be better in six months.
The survey also indicates a record high of home sellers who believe it is a good time to sell a home. But given the seasonal decline of housing inventory, it is likely this will translate to a surge of home listings in the spring. The added inventory combined with high consumer sentiment will boost the housing market. So sayeth the consumer.
Dan Krell is a Realtor® with RE/MAX Success in Potomac, MD. You can access more information at DanKrell.com