It’s a great time to buy a home. Selling a home? That’s a different matter.
The combination of the sharp decline in home prices since the housing bust and record-low mortgage rates have brought housing-affordability indexes to record highs. And with rents rising, home price-to-rent ratios—the housing equivalent of a price-to-earnings ratio for stocks—are at their lowest levels in more than a decade.
Small wonder, then, that when households polled for the Thomson Reuters/University of Michigan’s survey of consumers in August were asked whether it was a good time to buy a home, most said yes. That left an index based on their responses near its highest levels since 2004.
Households were also asked whether they thought it was a good time to sell a home, and there the response was very different, with most people saying no. While the Michigan index of home-selling conditions has made a little progress, it remains severely depressed.
Indeed, sellers’ lack of enthusiasm is a big part of why real-estate agents have been complaining about a lack of inventory lately. The obvious outcome is higher prices. And that looks likely in those areas where buyers are starting to line up but sellers remain on the sidelines.
Against that backdrop, it is hard to see why the Federal Reserve needs another round of quantitative easing to try to push mortgage rates even lower. Not least because having people lock into such low rates could cause problems if rates ever normalize down the line and people don’t want to give up their supercheap, fixed-rate mortgages. But the Fed is likely to see that as a problem for another day.