Good Time To Buy?

According to a survey from Fannie Mae of the younger generation of households, the homebuying sentiment has declined. In fact, a measure of “Good Time To Buy” has dropped to a record low of 25%. This means that just 25% of people surveyed (~250) think that now is still a good time to buy. While the sample size of the survey may remain slim and skew results, these numbers till mean something about overall home-buyer sentiment in 2022. After a red hot end to the real estate market in December 2021, it is safe to say that many buyers are becoming discouraged in the home-buying process. Here is why some people do not think this is a good time to buy a house.

Buying Through The Pandemic

Throughout the pandemic, many people truly took advantage of the government’s attempt to help the economy. While all this government help may have long-term economic impacts, it is safe to say that it helped keep the U.S. housing market afloat. In fact, we have seen record high home prices, record low housing inventory, and inflation of all goods at 40 year highs. Even though the Federal Reserve cut interest rates to near zero, and housing boomed, does not always mean sentiment is high. In fact, sentiment is at an all-time low, as prices reach an all-time high with record low inventory.

Because of the pandemic, money was easy to get your hands on as a homebuyer. However, now that we are on the opposite side of the pandemic (hopefully), we are seeing this ultra-easy monetary policy subside. In fact, because of what the market is pricing in in terms of Federal Reserve rate hikes, mortgage rates are also increasing. While the Federal Reserve does not control the long-end of the rate curve, a.k.a mortgage rates, they do have an impact on them. When the short-term rates are risen, the long-term rates begin to price in what the interest rates will be at maturity. In terms of real estate, these rates are your 30-year-fixed mortgage rates.

Good Time To Buy For Young Consumers?

Young consumers have learned to expect housing prices to increase further. More than any other consumer group, the younger generations see prices increasing further in most assets, not just housing. According to Fannie Mae’s Chief Economist, Doug Duncan, the younger generation has also reported a “great sense of macroeconomic pessimism.”

According to this graph provided on Bloomberg from Fannie Mae, the thrill to buy a new home is gone. In fact, the portion of Americans who are concluding that now is a good time to buy is at an all-time low. Even during The Great Recession of the early 2000s, sentiment was higher. We have seen a lot of buyers become priced out of the real estate market. Whether this has been caused by higher rates, higher prices, or lower inventory, many buyers have become discouraged and fatigued. In the survey conducted by Fannie Mae, 70% of people said it was a good time to sell, an all-time high dating back to the Recession. We have never seen such a skew in good-time-to-sell compared to good-time-to-buy. Perhaps, buyers have become numb to the seller’s market and have decided to just wait out the market.

Buyer’s Remorse

Many buyers experience the phenomenon of buyer’s remorse. Now, buyer’s remorse may also hit an all-time high, as buyers feel rushed and pressured to buy. While mortgage rates are rising and prices look to follow, you should not be pressured into buying. Historically, interest rates below 4.5% are still favorable. Also, locking in a monthly payment that will not increase as the cost-of-living does, helps fight inflation.

Homeowners and renters alike have a tough decision to make in the coming months as the FED makes moves to stomp out inflation. Not only is the FED looking to raise rates, but home prices are also expected to increase again this year. This will make for an interesting real estate market to come in 2022.