After setting an all-time low in October, Fannie Mae’s Home Purchase Sentiment Index (HPSI) rose for the second straight month in December as home affordability eased a bit.
According to the HPSI released Monday, the index rose 3.7 points in December to 61, but remained only slightly above October’s all-time low of 56.7.
Three of the index’s six components improved month over month, including those associated with homebuying conditions, mortgage rate outlook, and job security, Fannie Mae said.
Only 21% of respondents said they believe it’s a good time to buy, likely due to the ongoing affordability challenges posed by mortgage rates and home prices that are significantly higher than at this point last year. Year-over-year, the full index is down 13.2 points.
“In December, the HPSI inched upward slightly, as consumers reported increased expectations that mortgage rates and home prices may decrease over the next year — perhaps reflecting recently observed declines in mortgage rates and average home prices,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist. “However, the HPSI remains very low by historical standards, particularly the ‘good time to buy’ component, and respondents continue to cite high home prices and unfavorable mortgage rates as the primary reasons for their pessimism.”
Freddie Mac’s weekly Primary Mortgage Market Survey report released Friday showed that fixed mortgage rates inched up slightly, averaging 6.48%. A year ago at this time the 30-year fixed mortgage averaged 3.22%.
“As we enter 2023, we expect affordability to remain the top challenge for potential homebuyers, as even small declines in rates and home prices — from the perspective of the buyer — may not produce sufficient purchasing power,” Duncan said. “At the same time, existing homeowners may continue to wait to list their properties, since many have already locked in lower mortgage rates, creating minimal incentive to sell and buy again until rates are more favorable. We think the resulting tension will contribute to a continued decline in home sales in the coming months.”
Report Highlights
- Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home increased from 16% to 21%, while the percentage who say it is a bad time to buy decreased from 79% to 76%. As a result, the net share of those who say it is a good time to buy increased 8 percentage points month over month.
- Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home decreased from 54% to 51%, while the percentage who say it’s a bad time to sell increased from 39% to 42%. As a result, the net share of those who say it is a good time to sell decreased 6 percentage points month over month.
- Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months remained unchanged at 30%, while the percentage who say prices will go down increased from 34% to 37%. The share who think home prices will stay the same decreased from 30% to 29%. As a result, the net share of those who say home prices will go up decreased 3 percentage points month over month.
- Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 10% to 14%, while the percentage who expect mortgage rates to go up decreased from 62% to 51%. The share who think mortgage rates will stay the same remained increased from 24% to 31%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased 15 percentage points month over month.
- Job Loss Concerns: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 78% to 82%, while the percentage who say they are concerned decreased from 21% to 17%. As a result, the net share of those who say they are not concerned about losing their job increased 8 percentage points month over month.
- Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 27% to 25%, while the percentage who say their household income is significantly lower decreased from 17% to 15%. The percentage who say their household income is about the same increased from 55% to 59%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago remained unchanged month over month.
Fannie Mae’s HPSI distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey (NHS) into a single number. It reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making.
The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house; what direction they expect home prices and mortgage interest rates to move; how concerned they are about losing their jobs; and whether their incomes are higher than they were a year earlier.
Fannie Mae said its national housing survey is the most detailed consumer attitudinal survey of its kind, It polls approximately 1,000 respondents via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010).
The December 2022 National Housing Survey was conducted between Dec. 1-20, 2022. Most of the data collection occurred during the first two weeks of that period. Interviews were conducted by ReconMR on behalf of PSB Insights and in coordination with Fannie Mae.
