Tight Inventory Starting to Discourage Buyers
WASHINGTON – Fannie Mae’s latest monthly report finds that only 21% of Americans say it’s a good time to buy a home, down from 28% in September; and 41% think it’s a good time to sell a home – down from 44% in September.
“The ‘good time to buy’ component has declined notably despite low mortgage rates, due in part to the persistent challenge of a lack of affordable housing supply,” says Fannie Mae Chief Economist Doug Duncan. “In turn, the net share of consumers expecting home prices to increase over the next 12 months has fallen to its lowest reading in seven years.”
Meanwhile, the National Association of Realtors® (NAR) reported that 93% of metropolitan housing markets saw price gains in the third quarter, up from 91% in the second quarter.
“Incremental price increases are to be expected, but the housing market has been seeing reacceleration in home prices as more buyers want to take on lower interest rates in the midst of insufficient supply,” says NAR Chief Economist Lawrence Yun. “Unfortunately, income and wages are not rising as fast and will make it difficult to buy once rates rise.”
“It’s not just the overall supply of new construction that’s gone down, but the supply of starter homes, so it’s the affordability challenge at the entry level that’s been a particular challenge,” adds National Association of Home Builders Chief Economist Rob Dietz. “Right now only about 10% of newly-built home sales are priced under $200,000. Five years ago, that share was 1 in 5, and 10 years ago it was 40% of new home sales.”
At the same time, though, lower mortgage rates and a robust labor market mean overall consumer sentiment in housing remains strong, but fewer people in the survey said their household income was slightly higher than it was a year ago.
“I think what’s going to hold them back from over-heating is that prices have risen so fast relative to incomes,” says Redfin chief economist Daryl Fairweather. “Any time prices get too high, there’s going to be this reaction where there just aren’t enough homebuyers to purchase those homes.”
Source: CNBC (11/07/19) Olick, Diana
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