Investor Alert

Aug. 16, 2022, 9:09 a.m. EDT

American attitudes about whether it’s a good time to buy a home just hit the lowest level in a decade, another sign of the housing market’s slowdown

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By Aarthi Swaminathan

Both prospective home buyers and sellers are backing off from the U.S. housing market, a new survey shows.

Their anxiety over higher mortgage rates and a softening market was registered by the Fannie Mae Home Purchase Sentiment Index /zigman2/quotes/208846331/delayed FNMA -3.27% , which dropped by 2 points in July to 62.8. That’s the lowest level since 2011.

The percentage of respondents who said it’s a bad time to buy a home increased from 75% to 76%. Only 17% of respondents said it’s a good time to buy a home.

Higher rates are adding costs to potential homeowners: 67% of respondents expected mortgage rates to go up. The 30-year fixed-rate mortgage averaged 4.99% as of Aug. 4,  according to data released  by Freddie Mac on Thursday. That’s up from an average rate of 2.77% a year ago.

The purchase sentiment index “has declined steadily for much of the year, as higher mortgage rates continue to take a toll on housing affordability,” Doug Duncan, SVP and chief economist at Fannie Mae, said in a statement.

Potential buyers are also worried about the direction of the economy. Roughly a fifth of respondents said they are worried about losing their job in the next 12 months.

Even sellers are spooked: The percentage of respondents who said it’s a good time to sell a home fell from 68% to 67%.

“Unfavorable mortgage rates have been increasingly cited by consumers as a top reason behind the growing perception that it’s a bad time to buy,” Duncan said, “as well as sell a home.”

About 30% of respondents expect home prices to go down.

Potential sellers’ sentiment indicates that conditions are softening, according to Duncan, and also the fact that “fewer consumers expect home prices to go up.”

Fannie Mae’s National Housing Survey polled around 1,000 U.S. adults by telephone to gauge their attitudes toward “owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence.”

Meanwhile, weak home  sales numbersbuilder confidence , and  new construction , all add to chatter about whether the housing sector is in a  recession . One report went further and called it “ great slowdown .”

Fannie Mae is forecasting home sales to moderate over the coming year.

Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at aarthi@marketwatch.com

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