Homebuying sentiment hit a 10-year low in April as the housing market continues to heat up into the busy spring season, according to new data released Friday morning.

The Fannie Mae Home Purchase Sentiment Index (HPSI) fell 2.7 points to 79 last month from a month earlier. One part of the six-component index — buying conditions — turned negative for the first time in the survey's history. In April, the net share of consumers who say it is a good time to buy fell 14 percentage points from a month earlier. Three other components of the index, (home price outlook, job loss concern and change in household income), also decreased month-over-month, while selling conditions and mortgage rate outlook increased.

“April’s HPSI reading appears to have been acutely impacted by the ongoing lack of housing supply despite improving economic conditions,” said Doug Duncan, senior vice president and chief economist for Fannie Mae, in a press statement. “Consumer sentiment toward buying homes reached the lowest level in our survey’s 10-year history; unsurprisingly, respondents overwhelmingly cited the lack of supply and high home prices as primary reasons for their pessimism."

Last month, the percentage of respondents who say it is a good time to buy a home dropped to 47% from 53%, while the percentage who say it is a bad time to buy increased to 48% from 40%, according to Fannie Mae.

Real estate veteran Barbara Corcoran recently told Yahoo Finance that homebuyers are "panicked, depressed for good reason" and are "forced to spend a lot more on the house than they would." Her thoughts were echoed earlier this week by Jeff Taylor, Mphasis Digital Risk co-founder and managing partner, who told Yahoo Finance: "We have seen bidding wars at every price point."

Home price growth is surging at the fastest pace in 15 years, according to the latest Standard & Poor’s S&P CoreLogic Case-Shiller national home price index. The growth rate amounts to an increase of $35,000 in the median selling price for homes from just a year ago, according to Morgan Stanley strategist Vishwanath Tirupattur.

Median existing home prices reached a new high of $329,100 in March, up 17.2% from the same time a year ago — rising at the fastest pace of growth since the National Association of Realtors (NAR) started tracking prices in 1999.

"Demand and supply factors remain a tailwind for home prices," Tirupattur recently wrote in a research note, adding that millennials are partially driving demand for housing because that generation continues "to drive household formation at a rate 30-50% above the long-run rate of new household formation."

"Even before the [COVID-19] pandemic, demographic tailwinds and historically-low mortgage rates had pushed demand to high levels," Goldman Sachs economists said in a recent research note. "A shift in preferences during the pandemic caused demand to spike, and consumer surveys indicate that household buying intentions are now the highest in 20 years."

But the sticker shock is putting a damper on homebuying.

"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," said Duncan.

Total number of homes for sale in the U.S. fell to historic lows of 1.07 million units in March. Unsold inventory sits at a 2.1-month supply at the current sales pace, marginally up from February’s 2.0-month supply and down from the 3.3-month supply recorded in March 2020.

"The supply picture offers no quick fixes to the shortage of available homes," Goldman said. "Homebuilders are again facing headwinds that were already present before the pandemic, especially a lack of available plots to build on and a lack of construction workers. These constraints are likely to limit the pace of annual homebuilding to around 1.5 million in coming years."

Meanwhile, demand for homes doesn't seem to be waning. A leading indicator of future sales — pending home sales — ticked up in March after a two-month slowdown. And that means home sellers are probably feeling pretty good about this spring. The net share of those who say it is a good time to sell increased 8 percentage points in April month over month, according to the Fannie Mae.

"Consumer positivity regarding home-selling conditions nearly matched its all-time high, demonstrating a large divergence in perceived conditions between sellers and buyers, as measured by the gap between the two components," said Duncan. "As has become standard discourse in the housing industry recently, increasing the supply of homes for sale would certainly help bring balance to this strong seller’s market, but unfortunately the most recent data doesn’t suggest that inventory is likely to improve in the near future.”

Amanda Fung is an editor at Yahoo Finance.

Read more

Pending home sales springs back in March

US home price growth reaches 15-year high

Existing home sales slow for second straight month, while prices reach new high

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