Consumer sentiment regarding the housing market remains persistently pessimistic, according to the latest Fannie Mae Home Purchase Sentiment Index (HPSI). The index saw a 0.6-point decrease in November, indicating that consumers' outlook on homebuying conditions is hovering within the low-level plateau that was established in the first half of 2023.
The survey found that only 14% of consumers believe it is currently a good time to buy a home, a record low in the survey's history. Additionally, the majority of respondents anticipate both rising home prices and mortgage rates in the coming year.
"At the end of 2022, as mortgage rates approached 7%, a rate level not seen in over a decade, a plurality of consumers said they expected home prices to decrease; however, that optimism faded over the course of 2023. A significant majority of respondents have also continued to expect mortgage rates to increase or stay the same, though these expectations have tempered over the year," Doug Duncan, senior vice president and chief economist at Fannie Mae, said.
Despite a gradual decline in mortgage rates predicted for the next year, affordability is unlikely to see a substantial improvement due to the persistent housing inventory shortage.
"The lack of housing inventory is likely to remain a challenge for some time, and home purchase sentiment may continue to be suppressed as a result," Duncan said.
The forecast indicates that it will be a couple years before home sales return to more normal, pre-pandemic levels.
Highlights from the Home Purchase Sentiment Index:
Good/Bad Time to Buy: Only 14% of respondents believe it is currently a good time to buy a home, while 85% hold the opposite view. This results in a net share decrease of 1 percentage point month over month.
Good/Bad Time to Sell: 60% of respondents believe it is a good time to sell a home, a 3% decline from the previous month, while 40% view it as a bad time. This results in a net share decrease of 5 percentage points month over month.
Home Price Expectations: 41% of respondents expect home prices to rise in the next 12 months, while 24% expect a decrease. This results in an unchanged net share compared to the previous month.
Mortgage Rate Expectations: 22% of respondents anticipate lower mortgage rates in the next 12 months, an increase from the previous month. Meanwhile, 44% expect rates to rise, and 34% believe rates will remain stable, leading to an 8 percentage point increase in the net share of those anticipating lower mortgage rates.
Job Loss Concern: The percentage of respondents concerned about losing their job in the next 12 months increased to 23%, while those not concerned decreased to 76%. This resulted in a net share decrease of 4 percentage points month over month.
Household Income: The percentage of respondents reporting significantly higher household income compared to the previous year decreased to 19%, while 12% indicated significantly lower income. Those reporting similar income decreased slightly to 68%, resulting in a 3 percentage point net share decrease.
Despite the prevailing pessimism, the housing market remains in a state of flux, and experts anticipate ongoing changes as economic conditions evolve in the coming months.
