A record number of consumers say it's a bad time to buy a home

A record number of consumers said right now is a bad time to purchase a home, as they are still wary of rising interest rates and high home prices, Fannie Mae said.

Yet its latest Home Purchase Sentiment Index overall, which additionally factors in opinions on interest rates, home prices and employment, although still near its low point, rose in October to 64.9 from 64.5 in September. It is up 8.2 points from its record low of 56.7 set in October 2022.

Views on the economy are also a drag on the HPSI, with 78% of respondents declaring the U.S. economy is on the wrong track, primarily because of inflation, a gain of 7 percentage points from September.

"Although the labor market is strong and wages have risen in the past year, consumers may believe that their purchasing power has not kept up with prices, as 69% of consumers say their incomes are 'about the same' compared to the previous year," said Doug Duncan, Fannie Mae's chief economist, in a press release. "We expect this tightness in household finances, along with high home prices and elevated mortgage rates, to prolong the affordability challenges facing many would-be homebuyers."

While the share of respondents declaring October was a bad time to purchase a home was at a record high 85% — up one percentage point from September — only 37% said it was a bad time to sell, unchanged from the previous month. It means that 63% of consumers said it was a good time to sell.

Forty percent of consumers think home prices will rise in the next 12 months, while 36% expect them to stay the same and 23% believe they will drop.

But just 16% of consumers think rates will decline through the next year, down from 17% in September's survey. Slightly less than half, 47% believe they will rise, up from 46% one month ago.

This differs from industry economist expectations that mortgage rates will fall next year. Duncan's most recent forecast shows rates peaking in the current quarter at a 7.3% average before dropping to 6.7% by the end of next year.

The Mortgage Bankers Association's October forecast has rates peaking at 7.2% in the fourth quarter before dropping to 6.1% one year later.

Furthermore, despite the negativity regarding the economy, the percentage of respondents not concerned about losing their job in the next 12 months rose 3 percentage points from a month ago to 78%.

Meanwhile, the share of consumers that plan to buy if they move stayed unchanged versus September at 69%. But when it comes to getting a mortgage, 58% of respondents said it would be difficult, compared with 42% that believed it's easy. That is a slight shift from 60% and 40% respectively in the September survey. That marks 12 consecutive surveys where a higher percentage of consumers felt it would be more difficult to get financing.

Those two data points are not used by Fannie Mae in its HPSI calculation.