It was a damp September, but it isn't the weather dampening potential homebuyers' spirit, according to the recent Fannie Mae Home Purchase Sentiment Index (HPSI).
Consumer confidence in the housing market, with mortgage rates over 7%, is leading to increased caution amongst potential homebuyers and sellers.
The HPSI saw a decline of 2.4 points in September, settling at 64.5. This comes as a result of the rise in mortgage rates, as well as other factors such as limited housing supply and perceived unfavorable housing values. Five of the six HPSI components saw a month-over-month decrease. Specifically, in September, a mere 16% of consumers believed it was a good time to purchase a home, equating to the all-time survey low established last year. Moreover, those expressing optimism about selling a house dropped by 3 percentage points from the previous month, resting at 63%.
"Notably, the share of consumers expressing pessimism about homebuying conditions hit a new survey high in September, with 84% now indicating that it’s a bad time to buy a home. On the sell side, respondents also listed unfavorable mortgage rates as the top reason why they believe it’s a bad time to sell a home," Doug Duncan, Fannie Mae chief economist, said.
He added that many homeowners are reluctant to relinquish their lower 'locked-in' mortgage rates, indicating a larger trend of homeowners anticipating their property values could be negatively impacted if higher mortgage rates limit the pool of qualified buyers.
Furthermore, the survey results indicate that consumers do not anticipate any respite in housing affordability, with continued expectations of home price growth in the coming year. Many respondents also reported feeling a pinch in their personal financial situations, citing diminished year-over-year household incomes and increased concerns about job stability. Duncan forecasts this combination of factors will likely continue to impede home sales growth into the next year.
Key HPSI Insights include:
- Good/Bad Time to Buy: A decline of 4 percentage points month over month, with only 16% of respondents seeing it as a favorable time for purchasing a home.
- Good/Bad Time to Sell: A decrease of 7 percentage points month over month, with 63% of respondents believing it's a good time to sell.
- Home Price Expectations: An increase of 4 percentage points month over month, with 42% expecting home prices to rise over the next year.
- Mortgage Rate Expectations: A decrease of 1 percentage point month over month, with only 17% expecting rates to decline in the upcoming year.
- Job Loss Concerns: A decrease of 3 percentage points month over month, indicating growing concerns about job security.
- Household Income: A decline of 5 percentage points month over month in those reporting significantly higher incomes than the previous year.
The clear takeaway from the survey is that, as the housing market continues to face challenges from high mortgage rates and economic uncertainty, consumer sentiment is growing increasingly cautious.
