Sentiment improves slightly, but buyers are still bogged down by high rates and home prices
Consumer home purchase sentiment edged up for the second consecutive month in December but remained only slightly above its all-time low set in October, according to Fannie Mae.
The Home Purchase Sentiment Index (HPSI) rose to a reading of 61 in December, up 3.7 points month over month and down 13.2 points compared to the same time a year ago. Three of the six HPSI components improved, including those associated with homebuying conditions, mortgage rate outlook, and job security.
“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 Fannie Mae chief economist Doug Duncan. “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.”
According to Fannie Mae, only 21% of respondents think it is a good time to buy a home, likely because of affordability concerns posed by high mortgage rates and home prices.
Read more: Historical mortgage rates in the USA: Highest High and Lowest Lows
“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 said. “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.”
Other HPSI component highlights include:
- Good/Bad Time to Sell: The net share of respondents who say it is a good time to sell decreased 6 percentage points month over month to 51%.
- Home Price Expectations: The net share of those who say home prices will go up decreased by three percentage points to 30%.
- Mortgage Rate Expectations: The net share of respondents who say mortgage rates will go down in the next 12 months increased 15 percentage points month over month to 14%.
- Job Loss Concern: The net share of those who say they are not concerned about losing their job increased eight percentage points to 82%.
- Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago remained unchanged at 25%.
What are your thoughts on Fannie Mae’s latest HPSI findings? Share them in the comments below.
