Fannie Mae today (9-7-22) released its Home Purchase Sentiment Index® (HPSI) for August, which dropped 0.8 points to a reading of 62.0. This marks the sixth consecutive month of declines, as high home prices and elevated mortgage rates continue to drag down consumer sentiment, particularly home-selling sentiment. Year-over-year, the full index is down 13.7 points.
Despite the relatively small aggregate change, the HPSI experienced significant volatility among four of its six components, including those measuring consumer perceptions of homebuying and home-selling conditions, as well as expectations regarding the future direction of home prices and mortgage rates.
Consumers were slightly less pessimistic about homebuying conditions, according to the HPSI. The percentage of respondents that thought it was a good time to purchase a home increased from 17% to 22%, while the percentage of respondents who said it was 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.
The percentage of consumers believing it was a good time to sell a home continued its decline, falling from 67% to 59%, while the percentage who said it is a bad time to sell increased from 27% to 35%. This resulted in the net share of those who say it is a good time to sell dropping 16 percentage points month-over-month.
Doug Duncan, Fannie Mae’s Senior Vice President and Chief Economist, added additional background and his insight:
“The share of consumers expecting home prices to go down over the next year increased substantially in August. 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. Conversely, lower home prices would obviously be welcome news for potential first-time homebuyers, who are likely feeling the combined affordability constraints of the high home price and high mortgage rate environment. In fact, the survey’s ‘ease of getting a mortgage’ component dropped to an all-time low among this typically younger demographic (i.e., 18- to 34-year-olds). With home prices expected to moderate over the forecast horizon and economic uncertainty heightened, both homebuyers and home-sellers may be incentivized to remain on the sidelines—homebuyers anticipating home price declines and potential home-sellers not keen to give up their lower, fixed mortgage rate—contributing to a further cooling in home sales through the end of the year.”
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High Home Prices, Mortgage Rates Weighing on Housing Sentiment