Homebuyers get creative as market sentiment sours
Most consumers say it’s a bad time to buy, but for the determined, family members can help them overcome affordability hurdles.
- In Fannie Mae’s latest home purchase sentiment report, only 16% of consumers says it’s a good time to buy.
- High mortgage rates, followed by affordability concerns, were the main drivers behind declining sentiment.
- But some buyers are finding ways to make a home purchase work by leaning on family members, a Realtor.com report found.
Elevated interest rates have many would-be homebuyers looking for creative ways to save enough money to buy their first home.
Mortgage rates hit a 23-year high last week, averaging 7.49% — with daily rates trending up. Elevated rates have not only eroded homebuyer purchasing power, but they have also forced many to consider alternatives like moving in with family or co-buying a home in order to save money.
"Mortgage rates persistently over 7% appear to be deepening the malaise consumers feel about the home purchase market," Fannie Mae Chief Economist Doug Duncan said in a news release accompanying the organization's latest consumer sentiment survey. "In fact, high mortgage rates surpassed high home prices as the top reason why consumers think it's a bad time to buy a home, a survey first," Duncan noted.
Consumers expect mortgage rates, prices to increase
The Fannie Mae Home Purchase Sentiment Index for September shows that consumers are feeling increasingly discouraged about buying a home. Only 16% of those surveyed said it's a good time to buy, down from 18% in August, and an all-time low for the survey.
Similarly, 46% of homebuyers expect mortgage rates to continue increasing, with only 17% of consumers holding onto hope that rates will decline in the next 12 months. At the same time, 42% of respondents believe home prices will go up, compared to 23% who expect to see price drops.
Pessimism about the real estate market coincides with increasing fears of job loss and declining household income, according to Fannie Mae. For instance, the share of consumers who are concerned about losing their job inched up from 22% to 23%. The number of respondents who reported lower income also increased from 12% to 13%.
"In our view, all of this points to home purchase affordability remaining a problem for the foreseeable future, which we forecast will keep home sales sluggish into next year," Duncan said.
Overall outlook may be grim, but some buyers are finding ways to make a home purchase work
Affordability challenges may be weighing on buyers, but they have also inspired some to take creative routes toward owning their first home, according to a new survey from Realtor.com.
Of the respondents who plan to buy a home within the next year, more than half said they are looking to their parents to help them with the purchase. Another 29% said they have already moved in with their parents to help save for a down payment, while nearly a third are living with other family members in order to save money.
Most prospective buyers are also open to non-traditional buying arrangements, the survey found. Eighty-three percent of respondents said they would consider co-buying their primary home — and living with — someone other than a spouse or partner, such as a child or other family member.
"Mortgage rates hovering at or near 7% have eroded buyers' purchasing power at a time when the consistently low number of homes for sale has kept housing markets surprisingly competitive," said Realtor.com Chief Economist Danielle Hale.
These "challenging market conditions," said Hale, appear to have changed consumer attitudes and behavior around homeownership. That includes forcing many would-be homebuyers to consider "alternative living situations they may not have considered in the past," she said.