Americans say it’s the worst time ever to buy a home

Scaffoldings are set up around single-family residential homes under construction in San Marcos, California, in March.

Americans remain historically gloomy about the state of the housing market.

Just 21% say it’s a good time to buy a house, according to a Gallup survey released Thursday. That is tied with last year for the worst reading in Gallup history.

An overwhelming majority of Americans — 76% — say it’s a bad time to buy a house. That’s just below the record of 78% set a year ago.

The findings reflect lingering frustration with the affordability crisis in housing. Young Americans seeking to buy a home have been confronted by a toxic one-two punch of record-high home prices and painful mortgage rates.

“Americans remain highly pessimistic about the market for homebuyers,” Jeffrey Jones, Gallup Senior Editor, wrote in the report.

The survey is yet another economic indicator that should trouble White House officials as they struggle to win over Americans upset with the high cost of living.

For context, in April 2019, the final reading before Covid-19, 61% of Americans polled by Gallup said it was a good time to buy a house. The record high was set in April 2003 at 81% as the housing boom was kicking into high gear.

Mortgage rates top 7%

Americans started to sour on the housing market as mortgage rates spiked and home prices surged after Covid. The percentage of Americans who said it was a bad time to buy a house climbed from just 36% in April 2019 to 69% by April 2022.

After years of dirt-cheap borrowing costs, mortgage rates have climbed sharply in recent years due to the Federal Reserve’s aggressive efforts to get inflation under control.

The average 30-year fixed rate mortgage edged down slightly on Thursday to 7.09% from 7.22% the week prior. This followed five straight weeks of increases. Current rates are twice as high as the rate in February 2020 just before Covid.

The spike in mortgage rates has made it increasingly unaffordable for prospective homebuyers.

For instance, monthly mortgage payments on a $500,000 home after putting 20% down are about $900 higher today under current rates than they would have been under the 3.5% rates of early 2020. Over the lifetime of a 30-year loan, that amounts to $331,200 in additional interest costs.

“Even at the high mortgage rates of today, many properties on the affordable price tier are drawing multiple offers — which automatically means only one winner and many who lost out on bids,” said Lawrence Yun, chief economist at the National Association of Realtors.

Mortgage rates should dip when the Federal Reserve lowers interest rates. However, stubborn inflation has delayed expectations on Wall Street for when the Fed will be able to cut rates. One of the causes of worse-than-expected inflation readings? High housing costs.

“Once mortgage rates retreat and as more supply appears on the market, as I anticipate later this year, more buyers will get into the market independently of what their sentiments are today,” Yun said.

Record home prices

The affordability headaches are compounded by the fact that home prices are up, too, amid a shortage of housing.

The median existing-home sales price increased 5% year-over-year in March to $393,500 — the highest price ever for the month of March, according to NAR. Home prices increased across the country, led by a 10% jump in the Northeast to $434,600.

Americans don’t think these home price gains are nearly done.

According to the new Gallup survey, 68% of US adults expect home prices in their local area to increase in the coming year. That’s up from 56% a year ago. The only higher readings in Gallup history were 71% in 2021 and 70%, matched in 2005 and 2022.

Of course, higher home prices cut both ways.

For those who already own a home, the jump in real estate values has added to their net worth. It helps explain why Americans’ inflation-adjusted median net worth increased by 37% between 2019 and 2022.

Homeowners can also tap that housing wealth as a source of cash, borrowing against the value of their home to pay bills, fund college tuition or renovate their home.

Yet many young Americans dreaming of owning their own home remain on the outside looking in. And the continued increase in prices will only push that dream further out of reach.

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