New data from Fannie Mae reveals how mortgage rates are affecting consumer sentiment, and particularly home-selling sentiment — and show that buyers and sellers have reached a stalemate.
Fannie Mae’s Home Purchase Sentiment Index (HPSI) fell 0.8 points in August to 62 points, its sixth consecutive monthly decline, as high home prices and elevated rates continue to weigh on consumer sentiment.
Despite the relatively small aggregate change, the HPSI experienced significant volatility in four of its six components. These include measuring consumer perceptions of homebuying and home-selling conditions, as well as expectations about the future direction of home prices and mortgage rates.
Month-over-month, consumers reported that home-selling conditions have worsened, although that component remains strongly positive on net. Consumers also report that homebuying conditions have improved, but 73% continue to report that it’s a “bad time to buy.” For the first time since the start of the pandemic, consumers are neutral, on net, about the future path of home prices.
An increasing share of consumers this month reported that prices will decline. Meanwhile, a greater share reported the expectation that mortgage rates will decline, even though a majority continue to believe that mortgage rates will go up over the next 12 months. The full index is down 13.7 points year-over-year.
“The share of consumers expecting home prices to go down over the next year increased substantially in August,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “Accompanying this, HPSI respondents reported a significant decrease in home-selling sentiment. We also observed a large decline in consumers reporting high home prices as the primary reason for it being a good time to sell a home, suggesting that expectations of slowing or declining home prices have begun to negatively affect selling sentiment.”
Lower home prices would be welcome news for home-buyers, most of whom are feeling the pressure of affordability constraints and a high-mortgage-rate environment.
The survey’s “ease of getting a mortgage” component dropped to an all-time low among the younger demographic (18- to 34-year-olds). As home prices are expected to moderate over the forecast horizon and economic uncertainty heightened, both homebuyers and home-sellers may be incentivized to remain on the sidelines.
Ultimately, there is a stalemate between homebuyers, who anticipate home-price declines, and potential home-sellers, who are not willing to give up their lower, fixed mortgage rates. This standoff only furthers the cooling in home sales through the end of the year.
Component Highlights:
Good/Bad Time to Buy: The percentage of respondents who say it's a good time to buy a home increased from 17% to 22%, while the percentage who say it's a bad time to buy decreased from 76% to 73%. 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's a good time to sell a home decreased from 67% to 59%, while the percentage who say it’s a bad time to sell increased from 27% to 35%. As a result, the net share of those who say it's a good time to sell decreased 16 percentage points month over month.
Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 39% to 33%, while the percentage who say home prices will go down increased from 30% to 33%. The share who think home prices will stay the same increased from 26% to 28%. As a result, the net share of Americans who say home prices will go up decreased 9 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 6% to 11%, while the percentage who expect mortgage rates to go up decreased from 67% to 61%. The share who think mortgage rates will stay the same increased from 21% to 25%. As a result, the net share of Americans who say mortgage rates will go down over the next 12 months increased 11 percentage points month over month.
Job-Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 78% to 79%, while the percentage who say they are concerned decreased from 22% to 21%. As a result, the net share of Americans who say they are not concerned about losing their job increased 2 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 increased from 24% to 25%, while the percentage who say their household income is significantly lower increased from 13% to 15%. The percentage who say their household income is about the same decreased from 61% to 59%. As a result, 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.
