Pessimism on the rise: supply shortage takes toll on consumer sentiment

Despite improving economic conditions, consumer’s optimism toward the US housing market plunged to a record low as housing supply shortage and soaring prices continued to take a toll on homebuyers.

Fannie Mae’s Home Purchase Sentiment Index (HPSI) fell by 2.7 points month over month to a reading of 79 in April. Consumers’ sentiment on homebuying conditions entered negative territory for the first time in the survey’s history, according to the mortgage giant.

“Consumer sentiment toward buying homes reached the lowest level in our survey’s ten-year history. Unsurprisingly, respondents overwhelmingly cited the lack of supply and high home prices as primary reasons for their pessimism,” Fannie Mae Chief Economist Doug Duncan said. “The decrease in home buying sentiment likely indicates that some consumers, potentially flush with savings – perhaps boosted in part by stimulus payments – may be attempting, but failing, to buy a home due to heightened competition for relatively few listed homes.”

Duncan noted that consumers in the household income range of $50,000 to $100,000 – a range inclusive of the Census Bureau’s reported median household income level – were more pessimistic because the affordable housing segment has been particularly competitive.

The decline in the homebuying component was partly offset by consumers’ ongoing optimism toward home-selling conditions, which has continued its year-over-year rise and has nearly returned to its pre-pandemic peak.

 “Conversely, consumer positivity regarding home-selling conditions nearly matched its all-time high, demonstrating a large divergence in perceived conditions between sellers and buyers, as measured by the gap between the two components. As has become standard discourse in the housing industry recently, increasing the supply of homes for sale would certainly help bring balance to this strong seller’s market, but unfortunately, the most recent data doesn’t suggest that inventory is likely to improve in the near future,” Duncan said.

HPSI component highlights:

• The net share of Americans who say it is a good time to buy a home decreased 14 percentage points to 47% in April.
• The net share of those who say it’s a good time to sell a home increased eight percentage points to 67% in April.
• The share of those who say home prices will increase over the next 12 months decreased four percentage points to 49%.
• The net share of Americans who think mortgage rates will go down over the next 12 months increased one percentage point to 7%.
• The share who say they are not concerned about losing their job in the next 12 months decreased one percentage point to 80%.
• The share who say their household income is significantly higher than it was 12 months ago decreased six percentage points to 21%.