Consumer Sentiment Toward Homebuying Declines

Mortgage applications may be going up, but consumer sentiment about buying a house is heading in the other direction.

Fannie Mae’s monthly Home Purchase Sentiment Index reports that consumer sentiment towards housing decreased by 4.7 points to 68.5 in April: its lowest level since May 2020.

Surveyed consumers expressed heightened concerns about housing affordability and rising mortgage rates. All six of the index’s components decreased month over month, with a survey-high 76% of consumers indicating that they believe it’s a bad time to buy a home, up from 73% last month. Additionally, 73% of respondents expect mortgage rates to continue their recent ascent over the next 12 months, also a survey high. Year over year, the full index is down 10.5 points.

Doug Duncan, Fannie Mae senior vice president and chief economist, said the index in April fell to its lowest level since the first few months of the pandemic as consumers continue to face difficult home buying conditions due to high inflation and home price appreciation and rising mortgage rates. 

“The current lack of entry-level supply and the rapid uptick in mortgage rates appear to be adversely impacting potential first-time homebuyers in particular, evidenced by the larger share of younger respondents (aged 18- to 34) reporting that it’s a ‘bad time to buy a home,’” Duncan said.

“Additionally, consumer perception regarding the ease of getting a mortgage also decreased across nearly all surveyed segments this month, suggesting to us that the benefit of the recent past’s historically low mortgage rate environment appears to have diminished, and affordability is poised to become an even greater constraint going forward. This sentiment is consistent with our forecast of decelerating home sales through the rest of 2022 and into 2023.”