Not surprising given the staggering jumps in both home prices and mortgage rates, Americans have never been more pessimistic about home buying.
Just 30% of adults polled by Gallup said now is a good time to buy a home, down 23 percentage points from a year ago. This is the first time the percentage has been below 50% since the question was first asked in 1978. (Findings come from Gallup’s annual survey of Economy and Personal Finance, conducted April 1-19.)
Home prices are up 34% since the pandemic began, according to the S&P CoreLogic Case-Shiller National Home Price Index. The record surge in prices was fueled by mortgage rates, which hit more than a dozen record lows in the first year of the pandemic. However, interest rates have skyrocketed by more than two full percentage points in just the last few months.
Home affordability is at an all-time high. Because of higher prices and interest rates, the mortgage payment for an average home is now almost $2,000 more than it was just before the pandemic began.
The supply of homes for sale is also still historically low, and even the normally busy spring market has done little to boost inventories. Demand, particularly from the millennial generation, is strong but buyers are pulling back because of the cost. Home sales have fallen for five straight months.
“All major subgroups of Americans are significantly less positive about the housing market today than they were a year ago,” says the Gallup report. Those who were more positive about the market last year appear to have been the most depressed, with larger declines among Midwesterners, suburban residents and higher-income Americans.
By age, about a quarter of young adults aged 18-34 say now is a good time to buy, up from 42% a year ago. Among 35-54 year olds, 28% say the market is cheap, up from 52% a year ago. Older adults are slightly more positive, with 35% saying now is a good time to buy, versus 61% in 2021.
At the top end of the housing market, where there is more supply, home sales activity remains strong.
Despite higher mortgage rates, most still believe house prices will continue to rise. Analysts vary, but most believe current double-digit annual gains will shrink to around 4% to 6%. Consumers have long been optimistic about home prices, except after the Great Recession and subprime mortgage crash of 2008-2012.
While Americans are pessimistic about the current state of home buying, more than ever, Americans believe that real estate is the best long-term investment. About 45% go for real estate, 24% for stocks and 15% for gold. Real estate used to be behind gold when Gallup first asked this question in 2011, but it’s been the winner since 2014.