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Consumer Confidence In Housing Market Hits All-Time Low

Nov 07, 2022
Fannie Mae has announced that it will issue a request for proposals to hire an underwriting financial advisor who will assist in developing and implementing a plan for recapitalizing and ending its conservatorship

Fannie Mae survey finds just 16% of consumers say now is a good time to buy a home.

KEY TAKEAWAYS
  • The percentage who believe now is a good time to sell a home fell sharply, from 59% to 51% in October.

Consumers have never been this pessimistic about the housing market, at least in the past 11 years.

That’s the latest result of the Fannie Mae Home Purchase Sentiment Index (HPSI), which declined 4.1 points in October to 56.7. That marked its eighth consecutive monthly decline and, according to Fannie Mae, is the lowest reading since the inception of the index in 2011. 

Five of the six index components decreased month over month, including those associated with the conditions for buying and selling a home, as stubbornly high home prices and rising mortgage rates fueled consumers’ concerns about housing affordability.

Just 16% of respondents indicated that now is a good time to buy a home — a new survey low — while the percentage who believe now is a good time to sell a home fell sharply, from 59% to 51% in October.

Year over year, the full index is down 18.8 points, Fannie Mae said.

The index “reached an all-time survey low this month, in line with expectations that the housing market will continue to cool in the months ahead,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist. “Consumers are increasingly pessimistic about both homebuying and home-selling conditions.”

Given the persistently high home prices and unfavorable mortgage rates, “the ‘bad time to buy’ component increased to a new survey high this month, while the ‘good time to sell’ component continued its downward trend,” Duncan said. “Consumers also remain concerned about the movement of home prices — expectations that prices will decrease reached a new survey high, particularly among homeowners — offering further support to our forecast of home price declines in 2023.”

He added that, as continued affordability constraints reduce homebuyer demand, and homeowners become reluctant to sell at potentially reduced prices, “we expect home sales to slow even further in the coming months, consistent with our forecast.”

Survey Highlights

  • Good/Bad Time to Buy: The percentage of respondents who said it is a good time to buy a home decreased from 19% to 16%, while the percentage who said it is a bad time to buy increased from 75% to 80%. As a result, the net share of those who said it is a good time to buy decreased 8 percentage points month over month.
  • Good/Bad Time to Sell: The percentage of respondents who said it is a good time to sell a home decreased from 59% to 51%, while the percentage who said it’s a bad time to sell increased from 33% to 42%. As a result, the net share of those who said it is a good time to sell decreased 17 percentage points month over month.
  • Home Price Expectations: The percentage of respondents who said home prices will go up in the next 12 months decreased from 32% to 30%, while the percentage who said prices will go down increased from 35% to 37%. The share who think home prices will stay the same decreased from 28% to 26%. As a result, the net share of those who said home prices will go up decreased 4 percentage points month over month.
  • Mortgage Rate Expectations: The percentage of respondents who said mortgage rates will go down in the next 12 months decreased from 9% to 6%, while the percentage who expect mortgage rates to go up increased from 64% to 65%. The share who think mortgage rates will stay the same increased from 20% to 24%. As a result, the net share of those who said mortgage rates will go down over the next 12 months decreased 4 percentage points month over month.

Survey Methods

The HPSI is based on information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey (NHS) and distills it into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. 

The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

The most detailed consumer attitudinal survey of its kind, Fannie Mae’s NHS polled about 1,000 respondents via telephone. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI. The findings are compared with the same survey conducted monthly beginning June 2010.

The October 2022 survey was conducted between Oct. 1-22, 2022. Most of the data was collected during the first two weeks of that period. Interviews were conducted by ReconMR on behalf of PSB Insights and in coordination with Fannie Mae.

About the author
David Krechevsky was an editor at NMP.
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