Survey Shows Gloomier Housing Market Outlook Among Buyers, Sellers

Highlights from this report:

  • Americans have an increasingly gloomy outlook for the housing market.
  • Home buyers and sellers alike have become increasingly worried.
  • Economic woes, including a lack of job security, are a common concern.
  • This is based on a monthly survey conducted by Fannie Mae.
  • These concerns will have a negative impact on the housing market in 2020.

An Increasingly Gloomy Housing Outlook

Fannie Mae (one of the two government-sponsored corporations that buy mortgage loans from lenders) recently reported a rise of pessimism among prospective home buyers and sellers in the U.S.

Americans are showing an increased level of concern about the U.S. economy in general, and the real estate market in particular.

According to an April 7 press release from Fannie Mae, its Home Purchase Sentiment Index (HPSI) dropped by nearly 12 points in March. That put the index at its lowest, or worst, level since December 2016.

The consumers who were surveyed also reported that “homebuying and home-selling conditions have worsened and took a more pessimistic view of home price growth,” according to Fannie Mae.

Those concerns are warranted. The nation’s unemployment rate is rising steadily, following a record number of initial jobless claims in recent weeks. Jobless claims shot up to 6.6 million last week, and some experts believe that number could rise even further in the near future.

Rising unemployment is one of the biggest threats to the U.S. economy right now, and it accounts for the increasingly gloomy housing market outlook among buyers and sellers alike.

According to Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae:

“In March, the HPSI dropped to its lowest level since December 2016, with Americans reporting greater concern about their job security than at any point in the last six years.”

While President Trump remains strangely fixated on topics like mail-in voting and defunding the World Health Organization, the world itself continues to struggle with a once-in-a-lifetime pandemic and the economic turmoil it has caused. And it’s clearly taking a toll on the nation’s housing market.

Buyers Concerned About Job Security

Spring has sprung, and mortgage rates continue to hover near historic lows. Normally, those two things would be enough to cause an uptick in real estate market activity across the U.S. But these are not normal times.

The reality is that many home buyers are shying away from the housing market, due to an increasingly gloomy real estate outlook.

The biggest concern among home buyers in the U.S., as we move further into the spring of 2020, is joblessness. The latest Fannie Mae housing survey, cited earlier, showed a marked increase in the number of Americans who share these concerns. The percentage of Americans who worry they’ll lose their jobs within the next 12 months rose from 13% in February to 23% in March.

This is likely just the tip of the iceberg, said®’s director of economic research Javier Vivas. “We have yet to see the full extent of the impact of the [coronavirus] on housing,” he said.

Mortgage applications have also declined. According to the Mortgage Bankers Association, mortgage loan applications for home purchases dropped 33% the week ending April 8, compared to the same period last year. This is just one of many data points revealing the economic concerns and negative housing market outlook shared by many home buyers.

Related: Here’s what’s happening in housing

Sellers Fearful of Contamination, Lack of Demand

Home sellers, on the other hand, have their own reasons for a gloomy housing market outlook in spring / summer 2020.

Sellers worry about contamination that could result from potential buyers walking through their homes, touching surfaces, etc. And while real estate listing agents have adapted their practices to minimize such contamination, it remains a valid concern among many homeowners.

While the real estate business is considered “essential” under federal guidelines, some local municipalities are now prohibiting buyers from visiting the homes in person. Those restrictions limit buyers to viewing houses online, through photos, virtual tours and the like.

The bottom line to all of this: It’s not a great time to sell a home in America. It might be do-able. But it’s certainly harder than it was before the outbreak.

And based on the latest surveys, would-be sellers understand these challenges. Many have a negative outlook regarding the housing market. In the Fannie Mae survey, the percentage of Americans who say it’s a bad time to sell a house increased from 22% to 36%, from February to March 2020.

Here’s more evidence of the growing reluctance among sellers. A recent report from showed a notable decline in new property listings. During the week ending on March 28, the number of newly-listed properties declined by 34% compared to the same period a year ago.

If these trends and outlooks continue along these lines, the number of homes on the market could drop steadily through spring and into the summer of 2020.

A Bit of Optimism in Troubled Times

Mark Fleming, Chief Economist for the title insurance company First American, recently wrote a blog post distinguishing our current economic woes from the Great Recession of 2008.

He wrote:

“Many still bear scars from the Great Recession and may expect the housing market to follow a similar trajectory in response to the coronavirus outbreak. But, there are distinct differences … While housing led the recession in 2008-2009, this time it may be poised to bring us out of it.”

Before the last crash, the nation’s real estate market was largely overbuilt and overvalued, Fleming explained. This time around, that’s not the case. This time, Fleming noted, “housing is a casualty of a public health crisis turned economic, not the cause of an economic crisis.”