Consumers expressed their greatest economic pessimism in 10 years, while the The Fannie Mae Home Purchase Sentiment Index (HPSI) decreased 0.8 points to 74.7 in November. Overall, four of the index's six components decreased month-over-month.
In November, 74% of respondents reported that it's a good time to sell a home, while 29% of consumers reported that it's a good time to buy. Consumers also continued to report strong expectations that mortgage rates will increase over the next 12 months, and they expressed even greater pessimism about the direction of the economy, with 70% saying it's on the wrong track. The full index is down 5.3 points year-over-year.
"The HPSI experienced some shuffling among its underlying components in November, but the overall index once again stayed relatively flat," said Mark Palim, Fannie Mae vice president and deputy chief economist. "While consumers expressed even greater concern regarding the direction of the economy, with the share of respondents expressing pessimism hitting a 10-year high, overall housing sentiment remained stable. Consumers' concerns for their personal job situation have eased and respondents also reported feeling better about their income level compared to a year ago, with both of those components now nearing their pre-COVID levels."
The percentage of respondents who stated it was a good time to buy a home fell from 30% to 29% month-over-month, while consumers who stated it was a bad time to buy decreased from 65% to 64% month-over-month. As a result, the net share of consumers who believe it is a good time to buy stayed relatively flat from October through November.
Meanwhile, the percentage of consumers who said it was a good time to sell decreased from 77% to 74% month-over-month, and the percentage who said it was a bad time to sell increased from 17% to 21%. Overall, the net share of consumers who believe it is a good time to sell fell 7 percentage points month-over-month.
Home price expectations have elevated, though, with 45% of respondents stating prices will go up in the next 12 months compared to 39% the previous month. The percentage of respondents who believe prices will go down decreased from 22% to 21%. As a result, the net share of Americans who believe prices will increase within the next year grew 7 percentage points.
Additionally, job concerns are growing as the net share of Americans who say they are not concerned about losing their job decreased 1 percentage point month-over-month. Plus, a higher percentage of consumers believe mortgage rates will increase over the next 12 months, growing 3 percentage points month-over-month. Meanwhile, 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. This alludes to an overall dismal picture for housing affordability within the next year.
"Even though consumers are reporting broader macroeconomic concerns – with much of it likely tied to inflation – so far any negative sentiment tied to the economy has not translated into a meaningful decrease in actual purchase mortgage demand,” Palim continued. “According to this month's survey, an even greater share of consumers (particularly those with low and moderate incomes) expects mortgage rates to go up in the next 12 months, which may be a signal that some households plan to pull-forward their home purchase plans despite growing economic apprehension."
