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Finishing up Fannie Mae’s Home Purchase Sentiment Index (HPSI) dataset for 2022, year-end data for December showed the index increased 3.7 percentage points settling at a rate of 61%—a number just above the HPSI low set in October 2022.
Of the Index’s six major components, three of them improved month-over-month—those being homebuying conditions, mortgage rate outlook, and job security—while the others fell.
Just 21% of survey respondents believe it is a “good time to buy a home,” likely due to high mortgage rates and still-high home prices; this number is up from 16% in November. However, the percentage of respondents who believe it is a good time to sell a home decreased from 54% to 51% month-over-month.
On the topic of home price expectations, the percentage of respondents who say home prices will go up over the course of the next year remain unchanged at 30%, while the percentage of those who say home prices will go down increased to 37% from 34%.
The percentage of respondents who say mortgage rates will go down in the next year increased from 10% to 14%, while the percentage who expect mortgage rates to go up decreased to 51% from 62%.
Survey respondents were also found to be less pessimistic about their job security as compared to last month as the percentage of those who are worried about losing their job during the next year decreased from 21% to 17%.
Year-over-year, the index in total is down 13.2 points.
"In December, the HPSI inched upward slightly, as consumers reported increased expectations that mortgage rates and home prices may decrease over the next year—perhaps reflecting recently observed declines in mortgage rates and average home prices," said Doug Duncan, Fannie Mae’s SVP and Chief Economist. "However, the HPSI remains very low by historical standards, particularly the 'good time to buy' component, and respondents continue to cite high home prices and unfavorable mortgage rates as the primary reasons for their pessimism.”
“As we enter 2023, we expect affordability to remain the top challenge for potential homebuyers, as even small declines in rates and home prices—from the perspective of the buyer—may not produce sufficient purchasing power,” Duncan concluded. “At the same time, existing homeowners may continue to wait to list their properties, since many have already locked in lower mortgage rates, creating minimal incentive to sell and buy again until rates are more favorable. We think the resulting tension will contribute to a continued decline in home sales in the coming months."
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