U.S. consumers are seeing homebuying conditions at their worst in a generation as mortgage rates soar in response to the Federal Reserve’s aggressive tightening cycle.
About 4 in 5 consumers now describe buying conditions for homes as bad, a record in data going back to 1978, according to the University of Michigan’s consumer sentiment survey for November. The number of people who attribute the erosion in conditions to higher interest rates is at the highest level in 40 years, figures showed Friday.
The housing market, which is especially susceptible to higher borrowing costs, has been crumbling since the Fed began raising interest rates in an effort to curb demand across the economy and tame rampant inflation. Mortgage rates have been hovering around the highest levels in two decades, and as of last week were above 7%.
In the Seattle area, homes have been lingering longer in the market as higher rates diminished buyers’ power. King County saw 38% fewer pending single-family home sales in October than last year, and 34% fewer than at the same time in 2019, before the pandemic supercharged the market, according to data from the Northwest Multiple Listing Service.
In Snohomish County, there were three times as many homes still for sale at the end of October than at the same time last year, MLS data shows.
A separate gauge from the university showed homebuying conditions related to housing prices slipped in November. While somewhat improved since earlier this year, it remains deep in negative territory and well below the peak in mid-2020.
Higher rates aren’t just weighing on the housing market. Buying conditions for household durable goods slumped this month after surging in October, and the share of consumers who said purchase conditions for motor vehicles were bad because of rising borrowing costs climbed to the highest since 1982.
The University of Michigan’s main consumer sentiment gauge retreated to a four-month low in early November while inflation expectations rose.
This report includes information from Seattle Times staff.