Home buyers growing pessimistic

The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index® (HPSI) remained relatively flat in May, increasing by 1.0 points to 80.0. Four of the HPSI’s six components increased month over month, most notably the components related to personal finance, as consumers reported a much greater sense of job security and improved household income compared to the same time last year. However, for the second consecutive month, consumers also reported a significantly more pessimistic view of homebuying conditions; on net, that component fell to an all-time survey low, with only 35% of respondents believing it’s a good time to buy a home, down from 53% in March. Year over year, the HPSI is up 12.5 points.

“The HPSI remained relatively flat in May, although some of its underlying components shifted significantly, with consumers feeling substantially more positive about their jobs and income, while at the same time showing even greater pessimism about homebuying conditions compared to last month,” said Doug Duncan, Senior Vice President and Chief Economist. “The ‘good time to buy’ component fell further — hitting another all-time survey low – as consumers appear to be acutely aware of higher home prices and the low supply of homes, the two reasons cited most frequently for that particular sentiment. However, despite the challenging buying conditions, consumers do appear more intent to purchase on their next move, a preference that may be supported by the expectation of continued low mortgage rates, as well as the elevated savings rate during the pandemic, which may have allowed many to afford a down payment.” 

Home Purchase Sentiment Index – Component Highlights

Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased in May by 1.0 points to 80.0. The HPSI is up 12.5 points compared to the same time last year. Read the full research report for additional information.

  • Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home decreased from 47% to 35%, while the percentage who say it is a bad time to buy increased from 48% to 56%. As a result, the net share of those who say it is a good time to buy decreased 20 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 remained unchanged at 67%, while the percentage who say it’s a bad time to sell decreased from 26% to 25%. As a result, the net share of those who say it is a good time to sell increased 1 percentage point month over month.
  • Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 49% to 47%, while the percentage who say home prices will go down remained unchanged at 17%. The share who think home prices will stay the same increased from 27% to 29%. As a result, the net share of Americans who say home prices will go up decreased 2 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 7% to 6%, while the percentage who expect mortgage rates to go up decreased from 54% to 49%. The share who think mortgage rates will stay the same increased from 33% to 38%. As a result, the net share of Americans who say mortgage rates will go down over the next 12 months increased 4 percentage points month over month.
  • Job Concerns: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 80% to 87%, while the percentage who say they are concerned decreased from 16% to 12%. As a result, the net share of Americans who say they are not concerned about losing their job increased 11 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 increased from 21% to 29%, while the percentage who say their household income is significantly lower decreased from 17% to 13%. The percentage who say their household income is about the same decreased from 57% to 54%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased 12 percentage points month over month.

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