Consumer sentiment in the housing market hits an all-time low, with 86% believing it is the wrong time to buy a house, a Fannie Mae survey finds.

The housing market has reached a critical point, with consumer sentiment towards buying homes plummeting to unprecedented lows.

According to a recent survey by Fannie Mae, the general attitude towards purchasing homes has never been more negative.

Let us delve into the essential findings and expert insights to understand the housing market’s current state.

The Home Purchase Sentiment Index (HPSI), which reflects consumer attitudes toward the housing market, dropped by 2.5 points in May, landing at a historic low of 69.4.

A growing pessimism towards home-buying primarily drives this decline.

In May, 86% of consumers believed it was a bad time to buy a house, a significant increase from 79% in April.

The negativity is not confined to buying; it has also spilled over into selling.

The share of respondents who believe it is an excellent time to sell fell from 67% in April to 64% in May.

This decline in seller confidence adds another layer of complexity to an already challenging market.

Doug Duncan, chief economist at Fannie Mae, commented on the findings:

“Consumer sentiment toward housing declined from its recent plateau, as an increasing share of consumers struggle to find the positives in the current housing market. The current sentiment reflects frustration with the overall lack of purchase affordability.”

Consumers are not optimistic about the future, with 42% expecting home prices to rise in the next 12 months and another 42% believing mortgage rates will remain unchanged.

According to the latest data from Freddie Mac, the 30-year mortgage rate averages 6.99%.

Despite the gloom, there are early signs of a potential market turnaround. Inventory levels are increasing in 90% of the U.S., and the lock-in effect, which has been suppressing home listings, shows signs of weakening.

The lock-in effect occurs when homeowners with ultralow mortgage rates delay selling their homes to avoid taking on a new mortgage at higher rates.

Fannie Mae’s study indicated that 84% of respondents believe the lock-in effect is diminishing, which could lead to an increase in housing supply shortly.

According to the National Association of Realtors, the median price of resale homes in April was $407,600, while the median price of new homes was $433,500.

The current housing market sentiment reflects significant challenges, with consumers feeling increasingly pessimistic about buying and selling homes.

However, the potential loosening of the lock-in effect and rising inventory levels could herald a shift towards a more balanced market.

Keeping a close eye on these trends will be crucial for both buyers and sellers navigating these uncertain times.