Consumers It's a Bad Time To Buy a House and a Worse Time To Rent

After several years of a general belief that it’s a good time to buy a home -- even through a global pandemic -- it seems consumers are fatigued by low inventory and high competition.

According to the May Fannie Mae National Housing Survey, just 35% of consumers think it’s a good time to buy a home, while 56% say it’s a bad time.

It’s hard to believe that just two months ago the sentiment was reversed. In March, 53% said it was a good time to buy a home and 40% said it was a bad time to buy a home.

Sure, competition is heating up in what’s shaping up to be a record-setting year for home sales. But interest rates are still dancing around 3% and answers from the very same consumers surveyed by Fannie Mae reveal a population that still wants to buy.

Signs of a confident consumer base

In terms of job security and household income, consumer sentiment has returned to pre-pandemic levels. From April to May, the net share of employed consumers who are not worried about losing their job rose from 64% to 75%. In May, just 12% were concerned about losing their job.

And in terms of income, 29% of respondents say their income is significantly higher than 12 months ago. That’s up from 21% in April.

Looking ahead, 44% of respondents expect their financial status to improve over the next year while 39% expect it to remain the same. Just 16% believe it will get worse.

Perhaps the most telling, is an increasingly positive outlook on the economy. 44% of respondents say the economy is on the right track, up from the low-30s in January.

House market conditions

So based on this survey, consumers generally feel like they’re headed for greener pastures. Surely, then, the strong seller’s market that we’re currently experiencing is turning them off to home buying.

Well, their answers suggest otherwise.

About half of respondents believe home prices and mortgage rates will go up in the next 12 months.

So wouldn’t common wisdom say to buy now with a low mortgage rate and enjoy fast equity over the next year?

But perhaps the most interesting sentiment is that 72% of respondents say they would buy if they were going to move -- an all-time high for the survey. Meanwhile, an all-time low 23% say they would rent.

That means a healthy chunk of the survey respondents believe it’s a bad time to buy… but would still prefer to buy if they had to move.

That could mean consumers dislike the housing market but downright hate their landlords. Or it could mean that consumers are caught between a rock and a hard place at the moment. There’s certainly truth to that.

So, is it really a bad time to buy a house?

If you look at the topline, it’s easy to believe it’s a bad time to buy a house. However, dig a little deeper and the data paints a different picture.

Consumers generally believe home prices, mortgage rates, income, and job security are all going to rise within the next year.

So, again, isn’t the smart play to get in now and lock in a low mortgage rate on a home expected to rise in value?

Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.