Despite Economic Shift, More Growing Wary of Home Purchases

Fannie Mae’s latest Home Purchase Sentiment Index (HPSI) leveled off in May, increasing by just 1.0 points to 80.0. Four of the HPSI’s six components increased month-over-month, most notably the components related to personal finance, as consumers reported a greater sense of job security and improved household income compared to the same time last year at the height of the pandemic.

For the second consecutive month, consumers also reported a significantly more pessimistic view of homebuying conditions, with only 35% of respondents believing it’s a good time to buy a home, down from 53% in March, while year-over-year, the HPSI is up 12.5 points.

“The HPSI remained relatively flat in May, although some of its underlying components shifted significantly, with consumers feeling substantially more positive about their jobs and income, while at the same time showing even greater pessimism about homebuying conditions compared to last month,” said Doug Duncan, SVP and Chief Economist for Fannie Mae. “The ‘good time to buy’ component fell further—hitting another all-time survey low—as consumers appear to be acutely aware of higher home prices and the low supply of homes, the two reasons cited most frequently for that particular sentiment. However, despite the challenging buying conditions, consumers do appear more intent to purchase on their next move, a preference that may be supported by the expectation of continued low mortgage rates, as well as the elevated savings rate during the pandemic, which may have allowed many to afford a down payment.”

Fannie Mae’s HPSI distills information about consumers’ home purchase sentiment from its National Housing Survey (NHS) into a single number, reflecting consumers’ current views and forward-looking expectations of housing market conditions from answers to six NHS questions related to their home purchase decisions, including:

• Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home dropped to 35% in May from 47% in April. The percentage who say it is a bad time to buy increased from 48% to 56%. As a result, the net share of those who say it is a good time to buy decreased 20 percentage points month-over-month.
• Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home remained unchanged at 67%, while the percentage who say it’s a bad time to sell decreased from 26% to 25%. As a result, the net share of those who say it is a good time to sell increased one percentage point month over month.
• Home Price Expectations: The percentage of respondents who say home prices will increase over the next year decreased slightly from 49% to 47%, while the percentage who say home prices will go down remained unchanged at 17%. The share who think home prices will stay the same increased from 27% to 29%. As a result, the net share of Americans who say home prices will go up decreased two percentage points month-over-month.
• Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months decreased marginally from 7% to 6%, while the percentage who expect mortgage rates to rise decreased from 54% to 49%. The share who think mortgage rates will stay the same increased from 33% to 38%. As a result, the net share of Americans who say mortgage rates will go down over the next 12 months increased four percentage points month-over-month.
• Job Concerns: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 80% to 87%, while the percentage who say they are concerned decreased from 16% to 12%. As a result, the net share of Americans who say they are not concerned about losing their job increased 11 percentage points month-over-month.
• Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago increased from 21% to 29%, while the percentage who say their household income is significantly lower decreased from 17% to 13%. The percentage who say their household income is about the same decreased from 57% to 54%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased 12 percentage points month-over-month.

Click here for more on the latest Fannie Mae HPSI.