Confidence in US housing market approaches an all-time low

Consumer confidence in the US housing market approached an all-time low in February as buyers and sellers contend with a fresh spike in mortgage rates and mounting anxiety about job security.

Fannie Mae’s monthly Home Purchase Sentiment Index fell 3.6 points to 58.0 in February, sinking close to a record low established last October when the average mortgage rate briefly topped 7%.

The index has plunged by 17.3 points compared with the same month one year ago.

The survey has been conducted since 2011.

“The decline was partly driven by a substantial decrease in consumers’ sense of home-selling conditions, with most respondents who indicated it’s a ‘bad time to sell’ citing unfavorable economic conditions and mortgage rates as the primary reasons for that belief,” Fannie Mae chief economist Doug Duncan said in a release.

The percentage of homebuyers who felt it was a bad time to sell their homes increased to 44% in February, up from 39% the previous month.

At the same time, the share of Americans who said they were concerned about losing their jobs rose to 24% from 18% month-over-month.

“This month’s survey indicated an increase in job security concerns, which we’ll continue to monitor closely, since labor market uncertainty could play yet another factor in slowing housing activity,” Duncan added.

After cooling slightly late last year, mortgage rates have again been on the rise on an expectation that the Federal Reserve will continue hiking interest rates.

Fed Chair Jerome Powell admitted this week that interest rates are likely to rise higher than policymakers previously expected.

Aside from pushing mortgage rates higher, interest rate hikes generally impact the labor market.

The Fed’s most recent “dot plot” projections released in December showed the national unemployment rate hitting 4.6% later this year, up from its current level of 3.4%.

The average 30-year mortgage rate hit 6.73% this week, according to Freddie Mac. Some trackers already show the average rate topping the 7% threshold.

Rising mortgage rates crimp affordability for buyers and force sellers to slash prices to attract interest.

Some sellers may also think twice about listing their homes and giving up their lower mortgage rate.

Fannie Mae’s survey showed 55% of respondents expect mortgage rates to rise over the next 12 months, while just 15% expect rates to sink.

Additionally, the share of respondents who expect home prices to rise over the next year was just 30%, compared to 35% who expect prices to decline and 33% who see them staying the same.

Last week, real estate firm Redfin noted that US home prices have posted their first year-over-year decline in more than a decade – with higher mortgage rates as the key factor driving the trend.