Thursday
September 29, 2016

Sluggish Wages Hamper Buyer Optimism

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Sluggish Wages Hamper Buyer Optimism

Stagnant wages and increasing home prices are causing some home buyers to have the winter blahs.

Fannie Mae’s monthly Home Purchase Sentiment Index shows that fewer Americans think it’s a good time to buy a home now, with last month seeing a 1.7-point drop in consumer optimism toward owning a home.

Read more: Making the Most of Circumstantial Urgency

“People need to see bigger wage increases to be able to afford a home and collect the down payment,” says Steve Deggendorf, director of strategic research at Fannie Mae.

Thirty-one percent of the 1,000 Americans polled by Fannie Mae said it was a good time to buy a home in January.

Only 12 percent of respondents said their household income was “significantly higher” than it was a year ago, down from 3 percent in December, according to Fannie Mae’s report, which was released Monday.

“Housing affordability is being constrained because the pace of growth in real income has not kept up with gains in real home prices as demand has grown faster than supply,” says Doug Duncan, Fannie Mae’s chief economist. “On the bright side, consumers have been increasingly positive about their ability to get a mortgage, suggesting that credit tightness is not the main issue limiting housing market activity today. … We expect further progress in the [Fannie Mae housing index] to be limited until income growth picks up or supply, particularly in lower-priced homes, expands more rapidly.”

Low mortgage rates also may help. The 30-year fixed-rate mortgage averaged 3.72 percent last week, marking its fifth consecutive drop, according to Freddie Mac.

Lower mortgage rates help make buying a home more affordable, says Jonathan Smoke, realtor.com®’s chief economist.

“The alternative to buying a home isn’t more attractive—especially for the longer term,” Smoke says about the skyrocketing costs of renting. “Rents already in most places [exceed] what it costs to buy a home with a mortgage.”

Source: Fannie Mae and “Americans Less Optimistic About Owning a Home,” realtor.com® (Feb. 8, 2016)