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Consumer confidence in housing finally up due to falling home prices

BusinessReal EstateConsumer confidence in housing finally up due to falling home prices
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Mortgage rates are still double what they were a year ago, but home prices have been falling since June, and consumers are finally feeling better about a hot, highly competitive housing market.

A monthly housing sentiment index from Fannie Mae showed an improvement in sentiment from November to December. The index is still lower than a year ago and only a fraction of the way from its record lows in October and November.

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The share of respondents saying now is a good time to buy a home was still low at just 21%, but it was up from 16% in October. The stock is saying that now is a bad time to be short.

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However, the selling trend continued to decline. Respondents saying now is a good time to sell fell from 54% to 51%, while the share saying now is a bad time to sell fell.

Potential buyers visit a real estate show.

Carline Jean | Surya Sentinel | Tribune News Service | Getty Images

More consumers now believe home prices will fall over the next 12 months, and more also said they believe mortgage rates will decrease.

According to CoreLogic, prices in November, the most recent measurement, were 2.5% below the spring 2022 peak. They were still up 8% year over year, but that annual comparison is now about half of what it was in June.

The average rate on the popular 30-year fixed mortgage recently hit a high of 7.37% in October, but then slid back to the mid-6% range throughout November and December. As of last Friday, it had dropped to 6.2%, according to Mortgage News Daily.

“As we enter 2023, we expect this to remain the top challenge for potential homebuyers, as small declines in rates and home prices – from a buyer’s perspective – may not produce enough purchasing power,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist, in a release. “At the same time, existing homeowners can continue to wait to list their properties, as many are locked into already low mortgage rates, creating minimal incentive to sell and repurchase unless rates are higher.” Don’t be friendly.”

Duncan said this tension will continue to drag down home sales in the coming months.

Adding to housing confidence, the share of consumers who said they were worried about losing their jobs in the next 12 months fell from 21% to 17%. However, some said their household income is significantly higher than a year ago.

The housing market is now in its historically slow winter season, with some agents reporting that activity is “frozen”. Pending home sales, which represent contracts signed on existing homes, fell more than expected in November, suggesting that closed sales in January will also be lower.

Sellers who are braving the housing chill are making more concessions: About 42% of sellers did so in the fourth quarter, the highest share in recent years, according to Redfin, a real estate brokerage. This is up from just over 30% in both the previous quarter and the fourth quarter of 2021, and is higher than the previous high of 40.8% noted during the three months ending July 2020 at the start of the COVID pandemic.

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