Job Security, Mortgage Rates Are Latest Worries for Home Buyers
High mortgage rates and concerns about job security weighed on housing market sentiment in February, according to a monthly Fannie Mae survey.
Fannie Mae’s homebuyer sentiment index fell last month to its lowest level since November 2022, according to data released Tuesday. The drop sparked a three-month winning streak.
Respondents remained sour about the terms of buying a home, although sentiment improved from the previous month. Of those surveyed, 79% said February was a bad time to buy a home, down slightly from the 82% who said the same thing in January.
Sellers, on the other hand, remained divided: 54% said February was a good time to sell a home, a narrower majority than the 59% who said the same in January. Of those who said it was a bad time to sell, the key explanations were unfavorable economic conditions and mortgage rates, Fannie Mae chief economist Doug Duncan said in a statement.
“With home selling sentiment now lower than it was before the pandemic — and home buying sentiment remaining near its all-time low — consumers on both sides of the transaction seem cautious about the housing market,” Duncan said. “We believe these results confirm our expectation of subdued home sales in the coming quarters, especially now that mortgage rates are starting to rise again.”
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Mortgage rates have increased in recent weeks. Freddie Mac’s measure of the average interest rate on a 30-year fixed-term loan hit 6.65% last week, the highest rate since November. Of those who took part in the February survey, 55% said they expect mortgage rates to rise over the next 12 months, falling slightly month-on-month.
According to its February forecast, Fannie Mae expects a total of around 4.7 million home sales in 2023, down 17.6% from a year earlier. Sales are expected to recover to around 5.12 million in 2024.
Mortgage rates weren’t the only thing weighing on potential buyers and sellers. The proportion of respondents who said they were concerned about losing their job rose to 24%, the highest proportion in just over two years. “This month’s survey indicated an increase in concerns about job security, which we will continue to monitor closely as uncertainty in the job market could be another factor in the slowdown in housing activity,” Duncan said.
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Write to Shaina Mishkin at [email protected]