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Consumer Pessimism On Mortgage Rates Hits New High

Keith Griffin
Apr 07, 2022
housing pessimism

Over two-thirds of respondents expect mortgage rates to go up in next 12 months

KEY TAKEAWAYS
  • Consumers continue to express pessimism regarding the trajectory of mortgage rates.
  • The percentage of respondents who say it is a good time to buy a home decreased from 29% to 24%.
  • Respondents who say home prices will go up in the next 12 months increased from 46% to 48%.

The Fannie Mae Home Purchase Sentiment Index shows increasing pessimism from consumers about mortgage rates. They’re also expressing strong doubts about buying a home.

The index, also known as HPSI, decreased by 2.1 points to 73.2 in March, as consumers continue to express pessimism regarding the trajectory of mortgage rates and home buying conditions generally. Overall, four of the index’s six components decreased month over month, including the components asking consumers whether they expect mortgage rates to go up and whether they believe it’s a good time to buy a home.

Ongoing data streams show the pessimism is well founded. The daily mortgage rate has hit 5.25% this week. One analyst has said a 5.75% rate could pop the housing bubble.

In March, a survey-high 69% of respondents indicated that they expect mortgage rates to continue their upward ascent. On net, the “Good Time to Buy '' component set a new survey low, with 73% of respondents reporting that it’s a bad time to buy a home. Year over year, the full index is down 8.5 points.

“The ‘Good Time to Buy’ component of the index reached yet another record low, with high home prices, rising mortgage rates, and macroeconomic uncertainty serving as consumers’ chief concerns,” Mark Palim, Fannie Mae vice president and deputy chief economist, said. “Only 24% of consumers believe it’s a good time to buy a home, with similar levels of pessimism expressed by nearly all of the demographic groups surveyed,”

Palim continued, “This month, we also saw a survey-high share of consumers expecting their financial situations to worsen over the next year; this was especially true among current homeowners. These concerns, together with the run-up in mortgage rates since the end of 2021, will likely diminish mortgage demand from move-up buyers – and fewer move-up buyers mean fewer available entry-level homes, adding to the rising-rate challenges for potential first-time homebuyers. 

“If consumer pessimism toward home buying conditions continues and the recent mortgage rate increases are sustained, then we expect to see an even greater cooling of the housing market than previously forecast.”

Home Purchase Sentiment Index – Component Highlights

Fannie Mae’s Home Purchase Sentiment Index decreased in March by 2.1 points to 73.2. The index is down 8.5 points compared to the same time last year. The full research report has additional information.

  • Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy decreased from 29% to 24%, while the percentage who say it is a bad time increased from 67% to 73%. The net share of those who say it is a good time to buy decreased 11 percentage points month over month.
  • Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell increased from 72% to 74%, while the percentage who say it’s a bad time to sell decreased from 22% to 21%. The net share of those who say it is a good time to sell increased 3 percentage points month over month.
  • Home Price Expectations: The percentage of respondents who say prices will go up in the next 12 months increased from 46% to 48%, while the percentage who say home prices will go down increased from 16% to 20%. The share who think they will stay the same decreased from 32% to 28%. The net share of Americans who say prices will go up decreased 2 percentage points month over month.
  • Mortgage Rate Expectations: The percentage who say mortgage rates will go down in the next 12 months increased from 3% to 4%, while the percentage who expect mortgage rates to go up increased from 67% to 69%. The share who think mortgage rates will stay the same increased from 22% to 23%. The net share of Americans who say mortgage rates will go down over the next 12 months decreased 1 percentage point month over month.
  • Job Concerns: The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 87% to 86%, while the percentage who say they are concerned increased from 9% to 11%. As a result, the net share of Americans who say they are not concerned about losing their job decreased 3 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 27% to 29%, while the percentage who say their household income is significantly lower increased from 12% to 13%. The percentage who say their household income is about the same decreased from 56% to 53%. The net share of those who say their household income is significantly higher than it was 12 months ago increased 1 percentage point month over month.
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