Confidence in Housing Market Is Up, Reports Fannie Mae

Image source: Getty Images

New data reveals that sellers are particularly optimistic about today's housing market.

The past 12 months have certainly been interesting as far as the housing market is concerned. On the one hand, low inventory and inflated prices have made it an extremely challenging time for prospective homeowners to buy. On the other hand, record-low mortgage rates have helped compensate for ultra-high home prices.

Either way, buyers and sellers (but mostly sellers) seem to be more confident in today's housing market. After two months of declines, Fannie Mae's Home Purchase Sentiment Index -- which tracks the housing market and consumer confidence to buy or sell a home -- rose 3.7 points in January to 77.7. That's a good sign, though it's worth noting that the index is still down 15.3 points from a year prior.

A big reason for this jump stems from seller confidence. The percentage of respondents who feel it's a good time to sell a home increased from 50% in December to 57% in January. Those who feel it's a good time to buy remained unchanged at 52%.

In light of this, should you consider buying or selling a home right now?

Should you buy?

Many people have been impacted financially by the coronavirus pandemic. But if that didn't happen to you -- meaning, your job and paycheck are still stable and you haven't taken on added debt or wrecked your credit these past 11 months -- then it could be a good time to buy a home, provided you can find one in your price range.

That may be a tall order, though. The median price of an existing home sold in December of 2020 was $309,800, which represents a 12.9% increase from December of 2019. If you don't have a healthy home-buying budget, you may need to sit tight and wait for prices to come down. There's a good chance that will happen as 2021 progresses, especially if housing inventory begins to open up.

Should you sell?

In today's housing market, sellers clearly have the upper hand, and that's something you can use to your advantage. If you list your home, there's a good chance you'll end up happy with the price you get, and from there, you'll have the option to upsize, downsize, or make whatever move suits your needs and lifestyle.

But remember, you will need a place to live once you sell your home, so make sure you're a strong enough mortgage candidate if you're planning to buy. That means having limited existing debt, a steady job and paycheck, and a strong credit score. The minimum score you'll need is 620, but you should aim for a much higher one so that mortgage lenders are more inclined to offer you a competitive interest rate on your loan.

It also pays to research the cost of a home you might buy to replace the one you sell. If you're looking to upsize from a starter home to a larger property, for example, you may find that today's inflated prices put homes in your target neighborhood out of reach. If that's the case, you may want to hold off on selling until you're able to save more for a down payment.

Ultimately, confidence in the housing market may be up, but that doesn't mean it's the right time for you to buy or sell. Consider your own situation before making that call rather than relying on general sentiment you may or may not agree with.