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Consumer Frustration Creeps Into The Housing Market

Steve Goode
Jul 07, 2022
Fannie Mae HQ

Fannie Mae index shows pessimism among buyers and sellers

Consumer Frustration isn’t just reserved for the gas pump and the grocery store. Now you can add the housing market.

According to Fannie Mae, the June Home Purchase Sentiment Index decreased 3.4 points to 64.8, its second-lowest reading in a decade.

Surveyed consumers continued to express pessimism about home-buying conditions, with only 20% of respondents reporting it’s a good time to buy a home, while the percentage of consumers who believe it’s a “Good Time to Sell” fell from 76% to 68% in June.

Overall, four of the index’s six components decreased month over month, including the components associated with perceived job stability and household income.

Notably, a survey-high 81% of consumers believe the economy is on the “wrong track” and, for the first time in nearly seven years, a plurality of respondents said it would be difficult to get a mortgage, potentially a function of elevated home prices and higher mortgage rates. Year over year, the full index is down 14.9 points.

“In June, a survey-record 81% of consumers reported that the economy is on the wrong track, suggesting to us — and corroborated by other recently released consumer confidence measures — that people appear to be growing increasingly frustrated with inflation and the slowing economy,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “Moreover, 21% of respondents expressed job-stability concerns, the highest percentage in 18 months. This month’s HPSI reading reflects these macroeconomic and personal financial concerns, with housing sentiment additionally diminished by the recent rapid increases in mortgage rates.”

Highlights of the index included:

  • Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home increased from 17% to 20%, while the percentage who say it is a bad time to buy decreased from 79% to 75%. As a result, the net share of those who say it is a good time to buy increased 7 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 decreased from 76% to 68%, while the percentage who say it’s a bad time to sell increased from 19% to 26%. As a result, the net share of those who say it is a good time to sell decreased 15 percentage points month over month.
  • Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 47% to 44%, while the percentage who say home prices will go down increased from 23% to 27%. The share who think home prices will stay the same decreased from 25% to 23%. As a result, the net share of Americans who say home prices will go up decreased 7 percentage points month over month.
  • Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 4% to 5%, while the percentage who expect mortgage rates to go up decreased from 70% to 67%. The share who think mortgage rates will stay the same increased from 20% to 21%. 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-Loss Concerns: The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 81% to 78%, while the percentage who say they are concerned increased from 16% to 21%. As a result, the net share of Americans who say they are not concerned about losing their job decreased 8 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 decreased from 26% to 25%, while the percentage who say their household income is significantly lower remained unchanged at 16%. The percentage who say their household income is about the same increased from 54% to 58%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 1 percentage point month over month.                

“Interestingly, consumers’ perceptions of home-selling conditions declined meaningfully in June, returning to pre-pandemic levels. This was particularly true for homeowner respondents,” Duncan said. “At the same time, consumers, especially those in prime home buying groups, appear to be feeling the affordability pinch of higher mortgage rates.”

Duncan noted that approximately half of all respondents indicated that it would be "difficult" to get a mortgage, the highest such percentage since 2014. 

“As a whole, this month’s HPSI results are consistent with our forecast  of a slowing housing market through the rest of this year and next,” he said.

The Home Purchase Sentiment Index (HPSI) distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey (NHS) 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.

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