Confidence in the US housing market is approaching an all-time low

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Consumer confidence in the US housing market hit an all-time low in February as buyers and sellers grapple with a fresh hike in mortgage rates and growing concerns about job security.

The Fannie Mae Monthly Home Buying Sentiment Index fell 3.6 points to 58.0 in February, approaching a record low set in October last year, when the average mortgage rate briefly topped 7%.

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The index fell 17.3 points from the same month a year ago.

The survey has been conducted since 2011.

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“The decline was partly driven by a significant deterioration in consumer perceptions of home sales conditions, with a majority of respondents indicating that now is a ‘bad time to sell’, citing adverse economic conditions and mortgage rates as the main reasons for this sentiment,” Fannie. Chief Economist May Doug Duncan said in the release.

The percentage of homebuyers who believe now is not the right time to sell their homes increased to 44% in February from 39% the previous month.

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At the same time, the proportion of Americans who said they were worried about losing their jobs rose to 24% from 18% compared to the previous month.

“This month’s survey showed rising concerns about job security, which we will continue to monitor closely as labor market uncertainty could be another factor in slowing housing activity,” Duncan added.

An increase in Fed rates could lead to an increase in unemployment.
Bloomberg via Getty Images

After a slight cooling off at the end of last year, mortgage rates rose again in anticipation that the Federal Reserve will continue to raise interest rates.

Fed Chairman Jerome Powell acknowledged this week that interest rates are likely to rise higher than policymakers had previously expected.

In addition to raising mortgage rates, higher interest rates usually affect the labor market.

The Fed’s most recent point forecasts, released in December, showed the country’s unemployment rate hitting 4.6% later this year, up from the current 3.4%.

house for sale
The housing market has slowed significantly in recent months.
Bloomberg via Getty Images

The average 30-year mortgage rate hit 6.73% this week, according to Freddie Mac. Some trackers are already showing that the average bid is over the 7% threshold.

Rising mortgage rates limit affordability for buyers and force sellers to cut prices to raise interest.

Some sellers may also think twice before putting their homes up for sale and turning down a lower mortgage rate.

A Fannie Mae poll showed that 55% of respondents expect mortgage rates to rise over the next 12 months, and only 15% expect rates to fall.

In addition, the share of respondents who expect house prices to rise next year was only 30%, compared to 35% who expect prices to fall and 33% who believe prices will remain the same.

Real estate firm Redfin noted last week that U.S. home prices fell year-on-year for the first time in more than a decade, with higher mortgage rates a key driver of the trend.

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