The Fannie Mae Home Purchase Sentiment Index (HPSI) fell 0.5 points to 74.2 in December as consumers report divergent views on home-selling and buying conditions. In December 76% of consumers reported that it was a good time to sell a home, compared to 50% of consumers during the same time last year. A survey record-low of 26% of consumers reported it was a good time to buy. In December 2020, 52% of consumers reported it was a good time to buy. The full index is up 0.2 points year-over-year.
"The HPSI's underlying components changed dramatically in the last 12 months – particularly the two related to homebuying and home-selling sentiment – and we have seen the index drift slightly downward since March 2021, an indication that the housing market may begin to soften in the coming year," said Doug Duncan, Fannie Mae senior vice president and chief economist.
The percentage of respondents who said home prices will go up in the next 12 months decreased from 45% to 44%, while the percentage of respondents who said home prices will go down decreased from 21% to 19%. The share who said home prices will remain the same increased from 28% to 30%. Overall, the net share of Americans who said home prices will increase this year increased 1 percentage point month-over-month.
"Over the past year, low mortgage rates plus government stimulus programs helped increase mortgage demand, but the bidding-up of homes increased prices to record levels, making affordability a greater constraint for both first-time and move-up homebuyers,” Duncan continued. “Among homeowners, the 'good time to buy' sentiment fell 30 percentage points over the past year to its current level of 30%; for renters it fell from 37% to 21%. Even though demand remains strong, a majority of consumers clearly have reservations about purchasing a home at current prices."
The percentage of consumers who said mortgage rates will go down within the next 12 months decreased from 5% to 4%, while the percentage who said mortgage rates will go up decreased from 58% to 56%. The percentage who said mortgage rates will stay the same decreased as well, from 32% to 30%. The net share of Americans who responded that mortgage rates will increase within the next 12 months increased 1 percentage point.
Duncan confirmed the net share of consumers’ sentiment towards mortgage rates, stating: "We currently expect mortgage rates to continue to drift modestly upward through year end, despite inflation concerns, which will likely compound the affordability concerns expressed by consumers in the HPSI. Recent MBS issuance data indicating a rise in average debt-to-income levels also backstop that concern, suggesting additional affordability constraints.”
Meanwhile, Americans are growing more uncertain about their job stability. The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 83% to 82%, while the percentage who say they are concerned increased from 15% to 16%. Overall, the net share of Americans who say they are not concerned about losing their job increased 2 percentage points month-over-month.
“Combined with our survey results showing rising expectations for higher rent prices among consumers, we believe some would-be renters may look to accelerate their home purchase timeline, helping to drive continued strong (though decelerating) home price growth. We do expect an increase in new homes to come to market later in 2022, which should provide some supply relief; however, it may not be enough to meaningfully affect home prices. As such, affordability is likely to be a growing challenge over the coming year,” Duncan added.
