Americans are despondent over housing.
In the latest survey from Fannie Mae measuring housing sentiment, 84% of respondents in September said now is a bad time to purchase a house, a survey high. Just 16% believed it was a good time to buy, matching an all-time survey low set last year.
The pessimism underscores how much the recent run-up in mortgage rates is pounding the housing market with buyers and sellers holding little hope that conditions will improve anytime soon.
"Mortgage rates persistently over 7% appear to be deepening the malaise consumers feel about the home purchase market," Doug Duncan, Fannie Mae’s chief economist, said in a press statement. "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."
Read more: First-time homebuyer in 2023: What you need to know
'Confidence is unlikely to change'
Only 17% of respondents believe that mortgage rates will go down within the next 12 months, according to Fannie Mae, while 46% of consumers expect rates will continue to increase over that same period. The remaining 37% expect rates to stay where they are.
Rates have remained above 7% for eight straight weeks, a stretch not seen since 2000. Mortgage rates are expected to stay elevated after the Federal Reserve recently indicated that interest rates in general would remain "higher for longer." Last week’s job’s report, which showed the US economy added a stunning 336,000 new jobs in September, only provided more support for the central bank’s stance.
Higher mortgage rates have crushed affordability, with buyers paying the highest mortgage payment on record, according to Black Knight. As a result, buyers retreated.
Read more: Mortgage rates at 20-year high: Is 2023 a good time to buy a house?
The volume of mortgage applications slumped to its lowest level since December 1996 in September, the Mortgage Bankers Association (MBA) found, with applications to purchase hitting a 28-year low.
"Confidence is pretty much at a record low and seems unlikely to change," Danielle Hale, chief economist at Realtor.com, told Yahoo Finance. "Given mortgage rates and home prices remain really high, it takes a large chunk of people’s paychecks to buy a home today. Consumers know that and are not as confident in the housing market because it’s so expensive right now."
'No relief in sight'
Homebuyers weren’t the only ones with growing concerns.
Fannie Mae found that 37% of Americans said it was a bad time to sell, up from 34% in August, citing mortgage rates as the top reason.
"This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon," Duncan said, "...but it may also reflect worry of some homeowners that sales values might be suppressed slightly if the pool of qualified homebuyers is constrained by elevated rates."
The reluctance of homeowners to list has kept inventory tight and home prices propped up.
The national median list price declined seasonally to $430,000 in September, according to Realtor.com. That’s up 0.4% compared to a year ago, and marks the second month in a row where listing prices have increased on an annual basis, Realtor.com analysts said.
Prospective buyers didn’t show much optimism when it came to home prices, either. Fannie Mae found that 42% of respondents believe that prices would go up within the next year, compared to just 23% which expect prices to soften.
"Consumers are also not seeing much affordability relief in sight, as they continue to expect home prices to increase in the next 12 months," Duncan said. "They also indicated that their personal economic situations are showing signs of strain, including lower year-over-year household incomes and a reduced sense of job security."
Duncan added: "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."
Gabriella is a personal finance and housing reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.