Today's Hated Housing Market Is a Far Cry From 2005

"There's never been a worse time to buy a home..."

That's what most folks are thinking right now, based on the latest Fannie Mae National Housing Survey.

This monthly poll asks 1,000 consumers for their feelings toward housing. And this month's sampling was the most pessimistic in the survey's 11-year history.

A record low 25% of respondents said it was a good time to buy. And Fannie Mae's proprietary "Home Purchase Sentiment Index" hit its lowest level since May 2020.

If you've tried to buy a home in the past year, then you probably agree. Low inventories and high demand have turned the already stressful task of buying a house into an obstacle course of unexpected difficulties.

Don't take this negative sentiment as a sign that housing will break down, though. The outlook is as strong as ever, as I'll share today...

The National Housing Survey shows that buyers are miserable. And the media has been quick to jump on the story...

Here's a recent headline from TheStreet.com: "Now Is the Worst Time to Take Out a Mortgage, Fannie Mae Poll Finds."

Or from Time magazine: "There's Never Been a Worse Time to Buy a Home, Poll of U.S. Households Shows."

Meanwhile, Bloomberg sent out three recent blasts: "The Housing Party Is Starting to Wind Down"... and, "The Housing Boom May Be About to Go Bust"... and, once again, "There's Never Been a Worse Time to Buy a Home in a Poll of U.S. Households."

You might see these headlines and decide to stay out of the housing market. If everyone thinks buying is a bad idea, then housing must be about to cool off, right?

Not exactly. History tells a different story...

We don't need to look far back to see what a truly bad time to buy a home looks like. After the housing boom peaked in 2005, real estate was all downside for years.

Demand dried up by the third quarter of that year. Then, prices plummeted. A global financial crisis ensued.

Homeowners across America suffered. The lucky ones caught up in the bust were forced to sell their property at a loss... And the unlucky ones were foreclosed on.

Fannie Mae's sentiment survey doesn't go back far enough to measure the mood in 2005, before the bust. But if it did, you can bet it wouldn't show record-setting pessimism back then...

Instead, it would show boundless optimism.

Rather than doomsaying, the media gushed about the terrific opportunities in real estate in 2005...

Just look at these headlines that year from the New York Times:

  • "Prospering on Periphery of the Real Estate Boom."
  • "Buying a Second Home Without a First Look."
  • "In New York Real Estate, What Goes Up Keeps Rising."
  • "Using an I.R.A. to Buy Real Estate." (Yes... really.)

Bloomberg joined the party, too:

  • "U.S.: The Walls Won't Come Tumbling Down."
  • "The Long Wait for a Housing Slump."
  • "Manhattan Floats Skyward."
  • "Housing Hasn't Hit the Ceiling."

(Notably, that last one was in August – when housing had definitively "hit the ceiling.")

The irony in these headlines is profound. But at the time, no one saw what was coming.

Home prices in America had never declined before. Folks expected them to defy gravity forever. That's the kind of attitude that warns contrarian investors to get out... But it's a far cry from the impossibly tight – and pessimistic – housing market we see today.

It might seem like a bad time to buy a house. But if you do, rest easy...

Investments don't peak when everyone hates them. They peak when everyone loves them.

Housing was all the rage in 2005, right as prices peaked. It's hated today. And that means prices are headed higher.

Good investing,

Sean Michael Cummings

Further Reading

Today's housing market isn't the most affordable of all time. But one statistic tells us that it isn't a tough market for buyers just yet. And that means we could see housing boom through 2022... Get the full story here: One Chart Proves Housing Can Soar in 2022.

The real estate sector has experienced supply-chain problems and building delays throughout the pandemic. But that doesn't mean the housing boom has run its course yet... Read more here: Homebuilders Adapt to a Crazy Housing Market.

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