Home purchase sentiment remains flat as consumers adapt to higher rates

Homebuying sentiment has plateaued at a relatively low level, suggesting that many consumers may be coming to terms with high mortgage rates and home prices, according to Fannie Mae.

The June Home Purchase Sentiment Index (HPSI) posted a slight increase of 0.4 points month over month and 1.2 points year over year to 66, with six of the HPSI components showing little change during the period.

HPSI component highlights:

• The net share of Americans who say it is a good time to buy a house rose five percentage points to 22%. 
• The net percentage of those who say it is a good time to sell a house fell three percentage points from the previous month to 64%.
• The net share of Americans who say home prices will go up remained at 36% in June.
• The net share of those who say mortgage rates will go down over the next 12 months dropped 1 percentage point to 16%.
• The net share of Americans who say they are not concerned with losing their job also dipped one percentage point to 77%.
• The net share of Americans who say their household income is significantly higher than 12 months ago increased one percentage point to 19%.

"Home prices continue to be supported by the tight supply of homes available for sale, and, compared to the end of last year, fewer respondents today believe home prices will decrease over the next 12 months," Fannie Mae chief economist Doug Duncan explained.

"Additionally, consumers' mortgage rate expectations have tempered: A larger share of respondents think mortgage rates will stay the same over the next year, whereas mid-to-late last year, most thought rates would continue going up. This seems to signal that consumers are adapting to the idea that higher mortgage rates will likely stick around for the foreseeable future.

"We continue to forecast home sales to slow in the second half of the year, compared to the first half, due to ongoing affordability constraints and lack of housing supply."

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