A bullish housing market suddenly hit the brakes last month as Fannie Mae's housing sentiment index dropped sharply from June.
The percentage of consumers who think now is a good time to buy a house fell by seven points in July. The percentage of homeowners who say it's a good time to sell dropped by 11 points.
Normally, those two indicators move in opposite directions, as it is either moving toward a buyers market or one favoring sellers.
Declining sentiment on the part of sellers was the biggest drag on the index, and is something of a surprise. Prices have steadily risen this year as the number of available homes for sale has declined. That situation has put sellers in the driver's seat, since they have had less competition.
Economic conditions a factor
The survey shows homeowners who believe now is a bad time to sell, in many cases, cite economic conditions, believing there are fewer available buyers. Buyers who say now is a bad time to buy point to home prices. When put together, seller and buyer sentiment begin to make sense.
"It's clear that high home prices are a growing challenge helping to send buying sentiment to a record low," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "However, we find the notable decline in selling sentiment surprising. If it persists, this month's decrease in optimism regarding the direction of the economy, which appears to coincide with rising uncertainty regarding the outlook for pro-growth legislation this year, could weigh on overall housing sentiment in the second half of the year."
The share of consumers who believe it's a good time to buy a home is at an all-time low, at 23%. With home prices steadily rising, and now above housing bubble levels in many markets, that view might not be surprising. Especially when coupled with the fact that there are fewer homes on the market.
Radical swing in sentiment
The swing in seller sentiment, meanwhile, was more radical. In June, 39% said it was a good time to sell, a record high. A month later that sentiment had plunged to 28%. The numbers suggest the housing market could be entering a more uncertain phase.
In its most recent data poll, the National Association of Realtors (NAR) reported sales of existing homes dropped 1.8% in June. NAR Chief Economist Lawrence Yun says buyers are being frustrated by a lack of supply of homes for sale while prices are growing at a rate that is stretching their budgets.