Consumer confidence in the US housing market reached a near all-time low in February due to a new surge in mortgage rates and growing anxiety about job security.
Fannie Mae’s monthly Home Purchase Sentiment Index fell by 3.6 points to 58.0 in February, which is close to the record low established last October when the average mortgage rate briefly topped 7%.
The survey has been conducted since 2011, and the index has dropped by 17.3 points compared to the same month last year.
According to Fannie Mae chief economist Doug Duncan, the decline was partly driven by a significant drop in consumers’ sense of home-selling conditions.
Most respondents who thought it was a bad time to sell cited unfavorable economic conditions and mortgage rates as the primary reasons for that belief.
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.
Meanwhile, the share of Americans who said they were concerned about losing their jobs rose to 24% from 18% month-over-month.
The rise in mortgage rates is expected to continue as the Federal Reserve is predicted to keep hiking interest rates.
Fed Chair Jerome Powell recently admitted that interest rates are likely to rise higher than policymakers had previously expected.
Higher interest rates generally impact the labor market and could lead to higher levels of unemployment.
The housing market has slowed considerably in recent months, and rising mortgage rates are crimping affordability for buyers and forcing sellers to slash prices to attract interest.
Fannie Mae’s survey showed that 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.