Demand remains stable despite high economic pessimism, says economist
The US housing market remains healthy, despite economic pessimism rising to its highest level in a decade, according to Fannie Mae’s November Home Purchase Sentiment Index (HPSI).
Overall, the index dropped 0.8 points to 74.7 in November – with 74% of consumers saying that it’s a good time to sell a home and 29% of respondents thinking it’s a good time to buy. Compared to the same time last year, the HPSI was down 5.3 points.
“While consumers expressed even greater concern regarding the direction of the economy, with the share of respondents expressing pessimism hitting a 10-year high, overall housing sentiment remained stable,” said Mark Palim (pictured), Fannie Mae deputy chief economist. “Consumers’ concerns for their personal job situation have eased, and respondents also reported feeling better about their income level compared to a year ago, with both of those components now nearing their pre-COVID levels.”
The net share of consumers who said they were concerned about losing their jobs dipped 1% month over month to 83%. Meanwhile, those who reported significantly higher household income than a year ago decreased 1% to 23%.
Palim said that much of the pessimism about the economy’s direction is likely tied to inflation. But so far, any negative economic sentiment has not translated into a significant drop in actual purchase mortgage demand.
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Consumers who expect higher mortgage rates in the next 12 months grew from 55% to 58%. Around 45% also anticipate home prices will increase in the next 12 months, up seven percentage points month over month.
“An even greater share of consumers (particularly those with low and moderate incomes) expect mortgage rates to go up in the next 12 months, which may be a signal that some households plan to pull-forward their home purchase plans despite growing economic apprehension,” Palim said
Read more: What’s happening to US mortgage applications?
According to the Mortgage Bankers Association’s weekly survey, purchase loan applications rose 5% for the week ending November 26.
