Consumers are gaining confidence regarding their own personal financial situations, but are still pessimistic toward homebuying conditions, according to Fannie Mae’s Home Purchase Sentiment Index for July.
The index showed a modest increase in July, reflecting a complex picture of consumer confidence in the housing market.
The HPSI increased by 0.8 points to 66.8, marking a 4-point gain year over year. However, a record 82% of consumers reported that it's a "bad time to buy" a home, a survey high and a significant increase from 78% in June.
"While consumers are reporting confidence in the components related to their personal financial situations, it’s unlikely we’ll see housing sentiment catch up to other broader economic confidence measures until there is meaningful improvement to home purchase affordability,” Fannie Mae Senior Chief Economist Doug Duncan said.
Highlights:
Good/Bad Time to Buy: Consumer sentiment took a hit, with only 18% indicating it's a good time to buy a home, down from 22% in June. Conversely, those who believe it's a bad time to buy increased to 82%, resulting in a net decrease of 8 percentage points month over month.
Good/Bad Time to Sell: The figures remained stable, with 64% of respondents considering it a good time to sell and 36% a bad time, with no change from the previous month.
Home Price Expectations: There was an increase in those who believe home prices will rise in the next year (from 36% to 41%), and a decrease in those expecting prices to fall (from 26% to 24%), leading to a net increase of 6 percentage points.
Mortgage Rate Expectations: Slight shifts were observed, with those expecting mortgage rates to go up, decreasing to 45% from 47%, while those expecting rates to stay the same rose to 38% from 36%. The net share expecting rates to go down increased by three percentage points.
Job Loss Concern: Optimism about job security increased, with 80% of respondents not concerned about losing their job in the next 12 months, up from 77%. The net share of those not concerned about losing their job rose by six percentage points.
Household Income: This component remained unchanged, with 19% reporting a significantly higher household income than 12 months ago and 10% reporting significantly lower.
“In July, a significant majority of consumers indicated that their jobs are stable and that their incomes are the same or better than 12 months ago,” Duncan said. “However, homebuying sentiment once again matched its all-time low, with only 18% telling us that it's a good time to buy a home.”
High home prices and mortgage rates hovering around 7% are presenting challenges. “Further, the share of consumers expecting home prices to continue to rise has also been on a steady climb since March, which may only add to perceptions of unaffordability,” Duncan said.
With the continued upward trend in home price expectations and a lack of movement in the sentiment toward selling, it remains to be seen how these trends will evolve in the coming months and what impacts they may have on both the housing market and the broader economy.
