Fannie Mae Home Purchase Sentiment Index Remains Low in November

Fannie Mae on Thursday (12-7-23) released its Home Purchase Sentiment Index® (HPSI) for November. According to the report, the HPSI declined 0.6 points in November, remaining within the bounds of the low-level plateau it established in the first half of 2023. Overall, the full index is up 7.0 points year-over-year.

The HPSI for November reveals that consumer’s perceptions of homebuying conditions remain overwhelmingly pessimistic, as only 14% of consumers surveyed believe it’s a “good time” to buy a home—a new survey low. A large number of respondents also continue to expect both home prices and mortgage rates to increase over the next 12 months.

Adding additional background and his analysis to the report, Fannie Mae Senior Vice President and Chief Economist Doug Duncan said:

“Over the past year, the HPSI has plateaued at a low level, evidence of persistent consumer pessimism regarding the state of the housing market. Looking back, consumer belief that it’s a ‘bad time to buy a home’ hit a survey high several times this year—including this month—and each time the pessimism could be attributed to high home prices and high mortgage rates. 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. At the same time, consumers have expressed a reduced sense of financial security, with fewer respondents reporting household income growth over the year and a higher percentage saying their incomes remained the same.

The combination of persistent affordability challenges and less rosy household finances remain the primary drivers of the low-level plateauing of housing sentiment. Even if mortgage rates decline over the next year, which we currently expect, it’s unlikely to meaningfully affect affordability. 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. As our forecast indicates, we believe it will be a couple years before homes sales return to more normal, pre-pandemic levels.”