{"id":146479,"date":"2023-01-25T10:34:56","date_gmt":"2023-01-25T17:34:56","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=146479"},"modified":"2023-08-10T13:06:53","modified_gmt":"2023-08-10T19:06:53","slug":"homebuyer-sentiment-improves","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/homebuyer-sentiment-improves","title":{"rendered":"Homebuyer Confidence Increases \u2014 Is The Housing Market Rebounding?"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC5145458653\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Prospective homebuyers are getting a little more hopeful that mortgage rates will come down, and a greater share is feeling confident that it\u2019s a good time to buy a home, according to the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fanniemae.com\/newsroom\/fannie-mae-news\/easing-mortgage-rates-home-prices-provide-slight-boost-homebuyer-sentiment\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Fannie Mae Home Purchase Sentiment Index<\/span><\/a><span data-preserver-spaces=\"true\">, which has recovered slightly from its all-time low in October. The data comes from a survey of about 1,000 homeowners and renters who were asked more than 100 questions about their attitudes toward home buying and the economy.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The Fed has indicated that&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.reuters.com\/markets\/us\/fed-seen-delivering-quarter-point-hike-next-month-inflation-slows-2023-01-12\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">slower rate hikes are on the way<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;and may even cease once rates reach just over 5% since December data shows inflation is moderating. Meanwhile, many markets are already shifting into the hands of the buyer, with&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/seller-concessions-grew-in-q4\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">sellers offering more concessions<\/span><\/a><span data-preserver-spaces=\"true\">, and the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/fred.stlouisfed.org\/series\/CSUSHPINSA\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Case-Shiller Index<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;shows home prices declining month-over-month, though they\u2019re still elevated compared to a year ago. More prospective homebuyers are betting that the affordability crunch will ease, likely as a result of these changes. But if their optimism translates to increased demand, that could cause prices to rise again.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">More Respondents Believe It\u2019s a Good Time to Buy<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">When the Home Purchase Sentiment was at its lowest, only 16% of respondents believed it was a good time to buy a home. But in December of 2022, 21% of respondents said it was a good time to purchase real estate. Meanwhile, the share of respondents who said it was a bad time to buy fell from 79% to 76% in December.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Redfin&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.redfin.com\/news\/housing-market-update-demand-uptick-sales-decline\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">reports<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;there are early indicators of improving homebuying sentiment \u2014 both home tour requests and mortgage purchase applications have increased since October. Declining mortgage rates have reduced the typical homebuyer\u2019s mortgage rate by nearly $300, making homebuying possible again for more families. But the uptick in demand hasn\u2019t yet resulted in more pending home sales.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Is the rising Home Purchase Sentiment Index reflective of market conditions, or are homebuyers just relieved that mortgage payments have become more affordable? The availability of an affordable mortgage payment doesn\u2019t itself indicate a wise time to invest. It\u2019s typically best to invest when there\u2019s plenty of inventory, and home prices are at their lowest. If you can simultaneously capture low mortgage rates, that\u2019s the icing on the cake. But of course, low mortgage rates can increase the demand for homes, which can cause prices to rise. Similarly, if most homeowners believe prices have hit their trough and decide it\u2019s a good time to enter the market, that can cause price increases.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Analysts from top firms agree&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/nar-economist-housing-prices-rise\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">home prices are still poised to decline<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;in many markets, but if homebuying confidence grows, the demand could act as a floor for price drops or even cause prices to rise. Meanwhile, most economists&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/when-will-the-fed-lower-rates-again\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">don\u2019t expect the Fed to cut rates<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;until the end of 2023, so mortgage affordability is still a problem for prospective homebuyers.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The best time to buy may be in the future \u2014 but whether prospective homebuyers should wait is highly location-dependent. For example, Redfin Economics Research Lead Chen Zhao&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.redfin.com\/news\/housing-market-tracker-november-2022\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">says<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;prices in certain cities, like San Francisco and Austin, have already fallen from a year ago. Now could be the right time to act in these markets since prices could turn around as demand picks up.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Fewer Respondents Believe It\u2019s a Good Time to Sell<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The shift to a buyer\u2019s market is reflected in seller sentiment as well. 51% of homeowners now think it\u2019s a good time to sell, down from 54% in November of 2022. By contrast, in December of 2021,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fanniemae.com\/media\/46031\/display\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">76%<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;of respondents said it was a good time to sell \u2014 what a difference a year can make. The share of homeowners who said it was a bad time to sell also increased from 39% in November to 42% in December.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Most sellers probably wish they could time-travel to when mortgage rates were low and demand was sky-high. At that time, sellers could expect multiple over-asking offers. Now, many sellers are offering mortgage-rate buydowns or even lowering their listing prices as homes&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.redfin.com\/news\/housing-market-update-homes-linger-on-market\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">remain on the market longer<\/span><\/a><span data-preserver-spaces=\"true\">. It\u2019s not an ideal time to move, especially since home sellers face high mortgage rates on a new property. But sellers who can wait to sell can look forward to a predicted recovery in 2024 or 2025, along with more affordable rates.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">More Respondents Expect Mortgage Rates and Home Prices to Drop<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">While the percentage of respondents who said home prices would go up in the next 12 months remained unchanged from November at 30%, 37% of respondents now expect prices to go down, an increase from 34% in November. Meanwhile, 29% of respondents expect prices to stay the same, down from 30% in November. The split in consumer expectations may partially be due to differences in home price predictions for different markets.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The share of respondents who expected mortgage rates to come down in the next 12 months increased from 10% to 14%, while the percentage of respondents who believed mortgage rates would rise further decreased from 62% to 51%. 31% of respondents expect mortgage rates to stay the same over the next year. Many economists are also split in this case. For example,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.morningstar.com\/lp\/us-interest-rates-and-inflation\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Morningstar<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;expects the Fed to cut the federal funds rate in 2023, which would cause mortgage rates to drop. But&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.marketwatch.com\/story\/no-cuts-until-2024-says-goldman-economist-about-feds-likely-path-on-interest-rates-11670355514\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Goldman Sachs<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;predicts that there won\u2019t be a rate cut until 2024.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Job Confidence Is Growing<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The civilian unemployment rate was&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.bls.gov\/charts\/employment-situation\/civilian-unemployment-rate.htm\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">3.5% in December<\/span><\/a><span data-preserver-spaces=\"true\">, a slight decrease from 3.7% in November.&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.bls.gov\/news.release\/pdf\/empsit.pdf\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Job gains<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;were significant in hospitality and healthcare, while industries that exhibited declines showed only a slight change. Consumer sentiment reflects the robust job market. The Home Purchase Sentiment Index reveals 82% of respondents are not concerned about job loss, up from 78% in November, while the share that are concerned about unemployment dropped from 21% to 17%. Still, many economists believe there\u2019s&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.ft.com\/content\/c2d4d4b5-cbc8-4b5c-9ea3-44e9742d5b3a\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">cause for concern<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;that the unemployment rate will creep up.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Why It Matters<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The Fannie Mae Home Purchase Sentiment Index only increased by 3.7 points in December, and at 61 points, it&#8217;s only slightly higher than the all-time low. Consumers do not favor homebuying nearly as much as they did during the first half of 2022. Still, even a slight reversal in sentiment could be an early sign of recovery. For example, the Home Purchase Sentiment Index increased slightly in&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fanniemae.com\/sites\/g\/files\/koqyhd191\/files\/migrated-files\/resources\/file\/research\/housingsurvey\/pdf\/nhs-monthly-data-060820.pdf\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">May of 2020<\/span><\/a><span data-preserver-spaces=\"true\">, a month before&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/tradingeconomics.com\/united-states\/existing-home-sales\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">existing home sales<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;began to rebound.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Recovery Means Trouble for Homebuyers<\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If prospective buyers who had previously decided to wait have more confidence now, that could mean a slight rebound in demand. A growing number of prospective homebuyers would mean renewed competition for the supply of available homes. If homebuyer sentiment ramps up enough, the bidding wars that became common during the pandemic could return, causing prices to wriggle out of reach for buyers at a time when mortgage rates remain relatively high.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Still, the outlook for the housing market remains unpredictable. Investors are getting more hopeful that&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wsj.com\/articles\/investors-grow-more-confident-fed-will-pull-off-a-soft-landing-11670704543\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">the Fed may achieve a soft landing<\/span><\/a><span data-preserver-spaces=\"true\">. But if unemployment were to rise and consumer spending were to pull back, it\u2019s still possible the U.S. could land in a recession. In fact, economists are now predicting the probability of a recession in 2023 at 70%, an increase from previous months, according to a&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2022-12-20\/economists-place-70-chance-for-us-recession-in-2023\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Bloomberg poll<\/span><\/a><span data-preserver-spaces=\"true\">.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">That uncertainty may divide prospective homebuyers. Some may rush back into the market as mortgage rates become more affordable, while others may be more cautious, anticipating future price drops. Where the majority falls may, in part, determine the future direction of housing prices.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">To be uniquely aware that a market has hit bottom would be the ideal situation for an individual homebuyer. That individual could buy without competition and capture the lowest price. The problem is most market indicators accessible to an individual homebuyer are available to everyone else, too.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">It\u2019s important for investors to use as much data as possible to stay ahead of the curb. If you can beat the trend and buy just before buying gets popular again, you can reap the rewards. The Home Purchase Sentiment Index is merely one measure of demand, and so far, its uptick hasn\u2019t impacted sales activity. But as an early indicator, it\u2019s important to pay attention to, especially in those markets that have cooled the fastest.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"wp-block-group border border-gray-200 p-6 rounded-md has-slate-50-background-color has-background\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n    \n  <div \n    id=\"segemnt-view-event-block_624f52525847f\" \n    class=\"  \"\n    x-intersect:enter.once=\"\n      analytics.track('On The Market Blog Sponsor View', {\n        referrer: 'https:\/\/www.biggerpockets.com\/blog\/homebuyer-sentiment-improves',\n              })\n    \">\n    \n  <\/div>\n  \n\n\n<h3 class=\"has-text-align-left mt-0 wp-block-heading\"><strong>On The Market is presented by Fundrise<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-1024x252.png\" alt=\"\" class=\"wp-image-142373\" width=\"256\" height=\"63\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-1024x252.png 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-300x74.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-768x189.png 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black.png 1380w\" sizes=\"auto, (max-width: 256px) 100vw, 256px\" \/><\/figure>\n\n\n\n<p class=\"mb-0 wp-block-paragraph\" style=\"font-size:16px\"><strong>Fundrise is revolutionizing how you invest in real estate.<\/strong><\/p>\n\n\n\n<p class=\"mt-0 has-slate-600-color has-text-color wp-block-paragraph\" style=\"font-size:16px\">With direct-access to high-quality real estate investments, Fundrise allows you to build, manage, and grow a portfolio at the touch of a button. Combining innovation with expertise, Fundrise maximizes your long-term return potential and has quickly become America\u2019s largest direct-to-investor real estate investing platform.<\/p>\n\n\n\n<div id=button-custom-event-block_624f4a1837234 class='button-custom-event'>\n      <a href=\"https:\/\/t.sidekickopen84.com\/s3t\/c\/5\/f18dQhb0S7kF8cpngfW16gy-_59hl3kW7_k2841CX6NGN35Qwt3rN_mgW56Jw3w1HcgXpf197v5Y04?te=W3R5hFj26QkH2W4hJTY63T3pkxW3Fbt5S3Cdl5cf49M_4s04&#038;si=8000000019411002&#038;pi=6988e0ed-1aea-4af5-9769-8a0de4675eeb\" x-on:click=\"window.analytics.track(&#039;On The Market Blog Sponsor Click&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/homebuyer-sentiment-improves&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\" rel=\"noopener\">Learn more about Fundrise<\/a>\n  <\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Prospective homebuyers are getting a little more hopeful that mortgage rates will come down, and a greater share is feeling confident that it\u2019s a good time to buy a home, [&hellip;]<\/p>\n","protected":false},"author":613615,"featured_media":146481,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8,7119],"tags":[],"class_list":["post-146479","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/146479","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613615"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=146479"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/146479\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/146481"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=146479"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=146479"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=146479"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}