Housing market sentiment is nearing all-time lows as Americans fret over mortgage rates and employment outlook

• US housing-market sentiment is edging back to an all-time-low, according to Fannie Mae.
• That's because Americans are worried over rising mortgage rates and the unemployment outlook.

Housing-market sentiment is nearing an all-time-low as Americans fret over the outlook for mortgage rates and employment, according to Fannie Mae.

The government-sponsored mortgage giant said that its Home Purchasing Sentiment Index had fallen to 3.6 points in February, clocking in at 58. It's the first fall decline in the reading in three months, bringing the index back near its all-time-low of October 2022 when the 30-year fixed mortgage rate initially pushed past 7%.

The average rate on a 30-year mortgage on Wednesday was about 7.1%, according to Bankrate.

"The decline was partly driven by a substantial decrease in consumers' sense of home-selling conditions, with most respondents who indicated it's a 'bad time to sell' citing unfavorable economic conditions as the primary reasons for that belief," Fannie Mae chief economist Doug Duncan said in a statement on Tuesday.

That's partly because of the Federal Reserve's aggressive rate hikes to control inflation, which have influenced mortgage rates to hover around twenty-year high. Higher rates have put off prospective home buyers from the market as the cost of borrowing grows more expensive, with mortgage loan applications recently falling to their lowest level in nearly 30 years, according to the Mortgage Bankers Association.

Americans have also grown more concerned about unemployment, Duncan said. With higher interest rates comes increased talk of a recession, which may be deterring buyers from entering the market as they worry about job security.

"This month's survey indicated an increase in job security concerns, which we'll continue to monitor closely, since labor market uncertainty could play yet another factor in slowing housing activity," he added.

Markets are now expecting even steeper rate hikes from the Fed after Chairman Jerome Powell's hawkish testimony to lawmakers this week, with expectations for a 50 basis-point increase in March rising after his remarks.