A record percentage of Americans believe now is a bad time to buy a home

Plunging mortgage rates haven’t been enough to fix Americans’ perceptions about the housing market
By Sam Bourgi
•
02 October 2024
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buying a home

The percentage of Americans who believe it’s a bad time to buy a home has reached all-time highs, vastly exceeding the peaks of the 2008 financial crisis.

According to the University of Michigan’s consumer sentiment survey, 87% of respondents agreed that it’s a “bad time to buy a house.” This figure peaked at 46% during the height of the Covid crisis in early 2020.

Meanwhile, only 40% of Americans said it was a bad time to purchase a home during the 2008 financial crisis.

“This is by far the most pessimistic housing sentiment in history,” wrote The Kobeissi Letter, a financial newsletter.

“In fact, even when mortgage rates hit a whopping 18% in the 1980s, sentiment was not as bad as it is now,” the publication said. “Many buyers have simply given up and home prices just keep on rising.”

The survey data suggests Americans are still reluctant to buy a home, despite modest improvements in affordability conditions. This reluctance points to an ongoing cash crunch plaguing the average household.

As Creditnews recently reported, home-price growth has cooled to a 12-month low as mortgage rates have declined steadily since May. According to data from Freddie Mac, the average 30-year mortgage rate has fallen to its lowest level in 24 months.

Still, that means very little when the average home price is worth more than $420,000.

Buyer demand remains weak

A recent report from Fannie Mae suggested that homebuyer demand will remain weak for the rest of 2024.

Mark Palim, Fannie Mae’s deputy chief economist, said the U.S. housing market is still gripped by the so-called “lock-in effect,” as existing homeowners refuse to list their properties because they don’t want to give up their ultra-low mortgage rate.

According to Palim, “high-frequency data, such as mortgage applications, home showing requests, and listing views suggest that many potential homebuyers remain reluctant to make the jump.”

As Creditnews Research reported in April, nearly two-thirds of U.S. homebuyers have mortgages below 4%. Even with the sustained drop in rates over the past four months, average 30-year mortgages still carry a financing cost greater than 6%.

Altos Research’s Mike Simonsen believes housing demand will remain “stalled” as homebuyers wait for rates to fall even further.

Moody’s economist Nick Villa believes 30-year rates need to fall below 5.25% for housing activity to rebound meaningfully.

Anything above that “would not be enough to turn the tables such that renting becomes more expensive” than buying a home, said Villa.

To Villa’s point, renting a home in 2024 is much cheaper than buying across all 50 of America’s largest metros.

According to Creditnews Research, the monthly cost difference between homeownership and renting varies from as low as $567 in places like Jackson, Mississippi, to a whopping $11,303 in San Jose, California.

The rent-to-buying analysis compared renting to the total cost of homeownership, which includes mortgage financing costs, taxes, insurance, and repair.

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