Buyers are gloomy. Here's what they might be missing

Consumer housing confidence improved slightly in July, with Americans feeling more confident about the economy even as many worry about whether they can buy a house themselves.

Fannie Mae's Home Purchase Sentiment Index rose in July to 71.8, two points higher than June. That's close to where it was a year ago and right in the middle of its 12-month range, which has oscillated between a high of 75 last November and a low of 68.1 in March.

More consumers are predicting that both home prices and mortgage rates will go up in the next year. But on a more optimistic note, respondents felt more positive about their own finances, with fewer reporting fears about losing their job in the next year.

Nonetheless, there's pessimism among buyers. The percentage of respondents who thought it was a bad time to purchase a home increased to 77%, six percentage points higher than June. This comes as long-standing issues about affordability related to high home prices and sticky mortgage rates weigh on would-be buyers and keep them out of the market.

Sellers, the survey found, are still broadly optimistic, with the percentage who described now as a good time to sell remaining steady from June. That number has steadily declined over the past year, though. In July 2024, the net difference between respondents who said it was a good time and a bad time to sell was 31%; last month, the difference had shrunk to 21%.

This tracks with the shifting dynamics across the country. Many markets have seen home prices soften, or even start to fall, particularly where post-COVID building boons have led to large supply. Homes are now sitting on the market longer, and more sellers are having to accept offers lower than their asking price.

Should buyers be more optimistic?

Despite buyers' gloomy outlook, there may be reason for them to be hopeful. Data from Redfin found that for the four weeks ending August 3, the median home asking price moved up 2.3% year-over-year, the slowest increase in two years. Pending sales have fallen in recent months as well, meaning less competition for those who do decide to take the plunge.

Meanwhile, mortgage interest rates have mostly inched down over the past six months, with the average 30-year fixed-rate mortgage at 6.63%, according to the most recent Freddie Mac survey. That's 41 percentage points down from the high in January.

"Serious homebuyers should consider taking this window of opportunity to act fast and lock in a mortgage rate at the lowest level we've seen since last October," said Chen Zhao, Redfin's head of economics research, in a statement.