Homebuyers are More Optimistic About the Housing Market Rising as Price Growth Slows
If there’s any one consistent thing about the housing market over the last decade, it’s that home prices have constantly been on the rise.
But there could finally be some relief on the horizon for prospective homebuyers who have been whipsawed by the combination of rising home prices and high interest rates. That’s leading to rising optimism about the housing market.
Consumer sentiment towards the housing market was back on the rise in June, according to a newly released report from Fannie Mae. Most notably, the share of consumers who said that it’s a good time to buy a home rose from an all-time low of 14% in May to 19% in June.
While most consumers don’t think it’s a good time to buy given the lack of affordability, the rise in optimism is a welcome sign in the market.
“If mortgage rates decline through the end of the year, as we currently forecast, we do think home sales activity will pick up,” said Mark Palim, Fannie Mae Vice President and Deputy Chief Economist, said in a statement. “But progress on that front is likely to be slow due to the ongoing imbalance between supply and demand.”
Those affordability concerns are related to the increase in home prices. They increased for 148 straight months—more than 12 years, according to a new report from real estate data firm CoreLogic. However, the rate at which home prices are appreciating appears to be slowing down.
According to CoreLogic, home prices rose by 4.9% in May compared to May 2023, representing the lowest rate of appreciation since October 2023.
“While national annual home price growth continues to slow as anticipated, cooling appreciation over the past months is now observed in more markets, as the surge in mortgage rates this spring caused both slowing homebuyer demand and prices,” Selma Hepp, chief economist for CoreLogic, said in a statement.
While home prices rose in all states in May, there were several states where prices rose by much less than the national average. Included among those was Texas, Louisiana, Colorado, Utah, Wyoming, Idaho, and Oregon.
Each of those states saw home prices rise by 3% or less.
One factor that may be contributing to the pricing slowdown in those states is a rise in the number of homes for sale.
“Markets with notable inventory increases, including those in Florida and Texas, continue to see annual deceleration that is pulling prices below numbers recorded last year,” Hepp said.
The additional inventory doesn’t appear to be discouraging sellers. About 66% of consumers thought it was a good time to sell in June, according to the Fannie Mae report.
“The flip side to a difficult purchase market is an advantageous sales market…pointing to high home prices as the primary reason,” Palim said.
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