Boston Real Estate
MAR optimism … and pessimism
MAR optimism … and pessimism. Amid a record-low supply of homes for sale in the Boston suburbs and prices rising for Boston condos for sale, home buyers are becoming increasingly pessimistic about the housing market.
That’s according to Fannie Mae’s latest Home Purchase Sentiment Index, which has just fallen to the lowest ever point in the ten years it has existed.
The HSPI summarizes data from the National Housing Survey on consumers, conditions, attitudes, and intentions about housing. The index shows promise both as a stand-alone indicator and as a supplement for evaluating and forecasting housing and mortgage markets.
CNBC reported Friday that the percentage of respondents who said they believe now is a good time to buy a home has fallen from 53% to 47%, while those who say now is a bad time to buy has risen from 40% to 48%.
Those who responded to the monthly survey cited the tight supply of homes for sale and soaring prices as the main reasons for their pessimism, Fannie Mae’s senior vice president and chief economist Dough Duncan told CNBC. He said the decrease in homebuying sentiment is likely because some buyers, albeit flush with savings, might be “attempting, but failing, to buy a home due to heightened competition for relatively few listed homes.”
The most pessimistic respondents in the survey were those with incomes of between $50,000 and $100,000. The problem is that the shortage of homes for sale is most visible at the lower end of the market, which means affordable homes are especially difficult to find.
The situation is unlikely to change any time soon. Data from Redfin shows that competition for the few homes that are listed for sale is hitting record highs. It said it took an average of just 19 days to sell a home over a four week period ending May 2, the fastest sales time recorded since Redfin began tracking such data in 2012. One year ago, homes took an average of 35 days to sell. Redfin also revealed that around 45% of homes sold last month went under contract in less than a week.
Homes are selling for more too. The Redfin data shows that 48% of homes sold during that period did so for more than their list price, up 20% from a year ago. Meanwhile, home prices in general are up 11% from a year ago, driven by high competition and bidding wars. Prices of newly built homes are also rising due to the high costs of building materials.
Daryl Fairweather, chief economist at Redfin, told CNBC the home price increases could be a precursor to more widespread inflation throughout the U.S. economy. “Lumber prices are surging, which has driven up prices of new homes and indirectly drives up prices of existing homes,” she said.
However, Fairweather said that as states begin removing COVID-19 pandemic-related restrictions, we might see price increases in other sectors such as gasoline and food. If that happens, it could cut into people’s budgets and ease competition for housing, he said.
“A more balanced market could encourage more move-up homeowners to finally sell, because they won’t be so fearful about being able to find and compete for a home to buy,” she explained.
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Just updated 2021:
- The percentage of respondents who said it is a good time to buy a home decreased from 53% to 47%.
- Consumers with incomes between $50,000 and $100,000 were particularly pessimistic.
- Competition for housing does not appear to be letting up at all.
It is tough to be a homebuyer today. The supply of homes for sale is at a record low, homebuilders are slow to step up and prices are rising at the fastest pace in nearly two decades.
No wonder sentiment among homebuyers fell to the lowest level in the 10-year history of Fannie Mae’s monthly Home Purchase Sentiment Index.
Respondents to the survey largely cited high prices and tight supply as the chief reasons for their pessimism, according to Doug Duncan, senior vice president and chief economist at Fannie Mae.
“The decrease in homebuying sentiment likely indicates that some consumers, potentially flush with savings – perhaps boosted in part by stimulus payments – may be attempting, but failing, to buy a home due to heightened competition for relatively few listed homes,” Duncan said.
Competition for housing does not appear to be letting up at all. In fact, competition is hitting record levels.
In another record, 48% of homes sold for more than their list price, up 20 percentage points from the same period a year earlier.
Home prices are up more than 11% from a year ago, due to high competition that is resulting in bidding wars. Low mortgage rates are no longer helping much, because they helped to fuel those high prices. Prices are also rising for new construction, as builder costs are soaring.
“Right now we are seeing a substantial increase in home prices, which could be a precursor to more widespread inflation throughout the economy,” said Daryl Fairweather, chief economist at Redfin. “Lumber prices are surging, which has driven up prices of new homes and indirectly drives up prices of existing homes.”
Fairweather also notes that as states lift their Covid pandemic restrictions, there could be price increases in other sectors, from food to gasoline. That would cut into a homebuyer’s budget and might ease competition for housing.
“A more balanced market could encourage more move-up homeowners to finally sell, because they won’t be so fearful about being able to find and compete for a home to buy,” she added.
Boston Real Estate and the Bottom Line
But with all that said, Boston real estate buyers are still waiting in lines to bid on Boston real estate for sale. With interest rates still low, buyer demand is as high as ever.
Boston Real Estate
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