After plunging in April, consumer sentiment in housing began a promising recovery.
Home sales surged and beat expectations; homebuilders reported buyer traffic was, well, through the roof, and online housing-related searches soared.
Consumer confidence in housing now appears to be weakening, but consumer curiosity is not.
Fannie Mae’s monthly Home Purchase Sentiment Index fell back in July. The percentage of respondents who said it was a good time to buy a home decreased from 61% to 53%. Those who said it was a bad time to buy increased from 27% to 38%.
Some of the drop can be attributed to a rise in Covid-19 cases in July and growing concern over more parts of the economy shutting down again. Home prices were also a factor.
“Supply constraints appear to be applying upward pressure to consumers’ home price expectations, which in turn has contributed to both a sharp reversal in optimism about whether it is a good time to buy a home and further improvement in home-selling sentiment,” said Doug Duncan, chief economist at Fannie Mae.
Despite the decline in confidence, consumers are still much more interested in all facets of the housing market. The pandemic has both increased and altered demand for housing, and it has also helped push mortgage rates to record lows.
No surprise, Google searches for “Refinance home loan calculator” jumped nearly 4,000% last week, according to Google Trends. This as news hit of another record low on the 30-year fixed — and, of course, searches for, “How low will mortgage rates go?” quadrupled.
There is also more evidence of a surge of interest among first-time homebuyers. Searches for “Process of buying a house” jumped 950%, and “Minimum credit score to buy a house” was also popular. Recent home sales numbers have showed an uptick in the share of first-time buyers in the market.
Some consumers, however, are stretching their finances to make that purchase. Searches for “Can you use your 401(k) to buy a house?” were up 2,800% in the past three months. Low supply and high demand has heated up the competition this summer, and competition was already fierce before the pandemic struck.
Just over half of the offers submitted to Redfin agents faced a bidding war in July, according to the national brokerage. Competition was highest for single-family homes, followed by townhouses and then condominiums.
“We may still be in the early innings of the pandemic migration wave,” noted Daryl Fairweather, chief economist at Redfin. “If coronavirus cases continue to climb, more employers will likely make flexible remote work policies standard procedure, which will drive further migration out of large, expensive cities. As a result, we may see bidding wars gain more traction in suburban areas and small towns.”
Another sign of the times: “How to buy foreclosure” has been a breakout search in the past two months, as well as the question: “Buy a fixer-upper or move-in ready?” Either owner-occupant buyers are looking for a good deal, or more investors are looking for an opportunity. Likely both.
The growing trend of urban flight is also showing up in searches. Interest in the term “suburbs” hit an all-time high in July, not just in the U.S., but worldwide. U.S. cities with the highest search interest in “suburbs” in the past three months were Chicago, Philadelphia, New York, Los Angeles and Houston. While San Francisco didn’t make the top five, the outflow from the city has already caused a massive drop in rental occupancy and rent prices.
The trajectory of this housing recovery is still dependent on government relief to both the housing market specifically and the economy generally.
Some predict interest in housing will slow down after this initial surge, and while that trend has shown up in sentiment numbers, it has so far not shown up in home sales, prices, nor in consumer curiosity in just about every aspect of the market.