Little inventory, record-high home prices, deep-pocketed investors and not enough new construction may be pushing some buyers to leave the housing market.
Fannie Mae‘s most recent Home Purchase Sentiment Index for July found increased pessimism among homebuyers. The percentage of respondents to the survey that say now is a good time to buy a home decreased from 32% to 28%. The percentage who say it’s a bad time to buy increased, from 64% to 66%.
Meanwhile, purchase application activity is in line with 2019 levels — a decrease from activity in 2020 and earlier this year — said Hamilton Fout, vice president of economic and strategic research at Fannie Mae. The Mortgage Bankers Association’s most recent survey found, for the week ending Aug. 6, its unadjusted Purchase Index was up 1% from the previous week but 18% lower than the same week one year ago.
Buyers, in general, tend to leave the market this time of year, Fout said.
But Mary Gillach, principal of The Gillach Group at William Raveis in the Boston metro area, said it feels like buyers have started to leave the housing market earlier than they normally do this year.
“In a lot of markets, we started slowing down before the Fourth of July,” Gillach said, adding that usually doesn’t happen until mid- or late July.
She said ongoing worries about the pandemic, specifically the Delta variant, have caused some homebuyers in the Boston area to press pause on decisions.
Fannie Mae’s HPSI found sellers remain highly optimistic — 75% of respondents said now was a good time to sell — but that’s not creating a surge in inventory. Although, as others have noted, there’s been an uptick in recent months in new home listings, signaling perhaps some moderation in the overall housing market.
Fout said the vast majority of sales that take place in the market are for existing homes.
“If someone is going to sell their home, they’ve got to find another place to buy a home,” he continued. That’s likely delaying some homeowners’ decisions to put their house on the market, despite the perception that it’s a good time to be a seller.
Kelly Marks, current president of NC Realtors based in Greensboro, North Carolina, said a lot of baby boomers are fixing up or renovating single-family homes instead of putting them on the market in anticipation of downsizing or relocating for retirement.
That’s one of many factors keeping North Carolina housing markets extremely constrained. Investors are also swooping in across Sunbelt cities, such as ones in the Carolinas, to buy single-family homes with plans to rent them out. Charlotte, North Carolina, ranked No. 4 in markets that saw the highest share of homes purchased by investors in the second quarter.
With less than one month’s supply in many North Carolina housing markets, Marks said he’s not so sure there’s going to be much cooling off, as others have predicted on a national scale.
“(It’s) going to be a long time getting out of here,” he said. “There is no silver bullet.”
Nationally, Fout said Fannie Mae is forecasting an increase in home listings and a slowdown in home price appreciation in the coming months. Still, he said, it will take time to work through years of accumulated supply shortfall.
Those in the industry say with interest rates as low as they are, now may still be the right time to buy, even for buyers who are frustrated and feeling priced out of the market.
“Even though home prices are high, it really is about the mortgage payment,” Fout said. “Low interest rates have kept home price growth, from an affordability perspective, somewhat in check.”
Marks said when interest rates do rise again, even slightly, it could have buyers regret sitting on the sidelines to wait it out.