83% of consumers do NOT think now is a good to buy a house!
But, at the same time, Fannie Mae’s Home Purchase Sentiment Index just hit its highest level since March of 2022!
Fannie’s Home Purchase Index simply reflects consumers’ current and forward-looking views of overall housing market conditions.
There is a glaring disparity here: Only 17% think now is a good time to buy, but over 70% of consumers have favorable views of the housing market overall.
The reason for the disparity is the “forward-looking” aspect of the survey, as a record level of consumers expect rates to fall this year!
What this implies is that many potential homebuyers are waiting for rates to fall before they buy – and that could be a huge mistake!
As an aside, while I definitely agree that rates will fall this year, I suspect consumers think rates will fall for the wrong reason: they’re clinging to the myth that rates fall in election years.
As I explained in this blog, Rates Do Not Fall In Election Years, rates only fall in election years about 1/3 of the time (I did my own analysis going back 17 elections to 1956).
In any case, I do think rates will fall but I think it is because Janet Yellen desperately needs lower rates to finance our record deficits and because I think there are too many recession signals and crises that are still screaming “red alert!”
These signals include potential banking crises (see NYCB), China’s pending collapse (they have as many as 80 million vacant housing units!), falling LEIs, falling tax revenues, inverted yield curves, falling saving rates, falling GDI, and more.
BUT – with all that said – here is the primary point of my blog: When rates fall, buyers return to the market in droves – increasing competition massively.
We know this for certain because we have watched it play out in real-time repeatedly, as even a 1/4% drop in rates sparks a significant increase in purchase activity and far more multiple-offer situations (something we saw immediately after rates fell last week).
Hence, buyers who are convinced rates will fall should buy when rates are higher and competition is far less intense – and then refinance later when rates actually fall.
