Amid stories of other recent declines in the housing market, consumer confidence has also been falling for the last eight months.
According to the most recent iteration of Fannie Mae’s [1] Home Purchase Sentiment Index (HPSI), [2] five of the six major components decreased in October 2022 bringing the index to 56.7, down 4.1 points from September 2022, to the lowest level seen in the index’s 11-year history. Causes for this include persistently high home prices and unfavorable mortgage rates which weighed heavily on consumers’ housing affordability concerns.
A new survey low of 16% of respondents indicated that now is a good time to buy a home while the percentage who now believe now is a good time to sell a home decreased from 59% to 51%; this equates to a full year-over-year 18.8 point drop in the index.
"The HPSI reached an all-time survey low this month, in line with expectations that the housing market will continue to cool in the months ahead," said Doug Duncan [3], Fannie Mae Senior Vice President and Chief Economist. "Consumers are increasingly pessimistic about both homebuying and home-selling conditions. Amid persistently high home prices and unfavorable mortgage rates, the ‘bad time to buy' component increased to a new survey high this month, while the ‘good time to sell' component continued its downward trend.”
“Consumers also remain concerned about the movement of home prices—expectations that prices will decrease reached a new survey high, particularly among homeowners—offering further support to our forecast of home price declines in 2023,” Duncan concluded. “As continued affordability constraints reduce homebuyer demand, and homeowners become reluctant to sell at potentially reduced prices, we expect home sales to slow even further in the coming months, consistent with our forecast."
According to the index, results for the six tracked categories were as follows:
- Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home decreased from 19% to 16%, while the percentage who say it is a bad time to buy increased from 75% to 80%. As a result, the net share of those who say it is a good time to buy decreased 8 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 decreased from 59% to 51%, while the percentage who say it's a bad time to sell increased from 33% to 42%. As a result, the net share of those who say it is a good time to sell decreased 17 percentage points month-over-month.
- Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 32% to 30%, while the percentage who say home prices will go down increased from 35% to 37%. The share who think home prices will stay the same decreased from 28% to 26%. As a result, the net share of those who say home prices will go up decreased 4 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 from 9% to 6%, while the percentage who expect mortgage rates to go up increased from 64% to 65%. The share who think mortgage rates will stay the same increased from 20% to 24%. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased 4 percentage points month-over-month.
- Job Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 78% to 85%, while the percentage who say they are concerned decreased from 21% to 15%. As a result, the net share of those who say they are not concerned about losing their job increased 13 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 decreased from 26% to 25%, while the percentage who say their household income is significantly lower increased from 11% to 15%. The percentage who say their household income is about the same decreased from 61% to 60%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 5 percentage points month-over-month.
Click here [4] to view the report in its entirety.