Are consumers giving up on homebuying? 

Consumers are expressing their frustration with the housing market as relatively low inventory and affordability concerns continue to drag down potential buyers — and may be leading more of those would-be buyers to stick with renting. 

Summertime blues: Fannie Mae's Home Purchase Sentiment dropped 1.1 points in July to 71.5. While down from June, sentiment has improved since last summer, when it was in the 66-point range.

In July, only 17% percent of consumers said it's a good time to buy a home, down from 19% in June. The share who thought it's a good time to sell also decreased slightly, from 66% in June to 65% last month.

"While we're seeing signs that affordability may be improving in certain parts of the country as supply slowly comes online, household incomes remain stretched relative to would-be mortgage or rent payments, and our latest survey once again reflects real consumer frustration with the housing market," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. 

A concerning data point: One new trend that bears monitoring, according to Duncan, involves rent. A growing number of those surveyed said they plan to rent, rather than buy, when they make their next move.

"Right now, it's difficult to tell if this reflects simple buyer fatigue or a greater sense of disenchantment with the market, but we think it could have important implications should the trend continue," Duncan said.

Sentiment plummeted as buyers lost the advantage: Prior to the market slowdown, home purchase sentiment had been strong for many years. The index was consistently above 80 between 2014 through 2018, and above 90 through much of 2019 until the pandemic arrived in March 2020.

For more than a decade, from 2010 to early 2021, the majority of consumers also said it was a good time to buy. In April 2021, there was a clear shift in mood as inventory fell, giving sellers the upper hand.  

Will lower rates change attitudes? Consumer sentiment may shift once again given the big drop in mortgage rates following the weaker-than-expected jobs report, though any uptick could be gradual.

Mortgage activity jumped 6.9% in the past week, according to the Mortgage Bankers Association. However, much of that growth came in the form of refinancing, which was up 59% compared to a year ago. The unadjusted purchase index was up only 0.3% compared to the previous week and 11% lower than a year ago.

"Despite the downward movement in rates, purchase activity only saw small gains, with an increase in conventional purchase applications offset by decreases in government purchase applications," said Joel Kan, MBA's deputy chief economist. 

"For-sale inventory is beginning to increase gradually in some parts of the country and homebuyers might be biding their time to enter the market given the prospect of lower rates."