Fannie Mae Home Purchase Sentiment Index Unchanged for August

Fannie Mae on Thursday (9-7-23) released its Home Purchase Sentiment Index® (HPSI) for August. The Index remained effectively unchanged in August, as consumer confidence towards housing continued along the low-level set earlier in the year.

Three of the HSPI’s six components increased month-over-month, most notably the component measuring perceived home-selling conditions. In August, 66% of consumers reported that it is a “good time to sell” a home, compared to only 18% who said it was a “good time to buy” a home. Additionally, despite the significant rise in rates over the last couple of years, only 18% expect mortgage rates to decline in the next 12 months. Overall, the full HPSI is up 4.9% year-over-year.

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

“Mortgage rates once again breached the 7-percent mark in August, hitting a 22-year high and doing no favors for consumer sentiment. Consumers remain pessimistic toward the housing market in general and homebuying conditions in particular. The overall HPSI is maintaining the low-level plateau set a few months back, and we don’t see much upside to the index in the near future, barring significant improvements to home affordability, which we also don’t expect. While renters are slightly more pessimistic than homeowners, for two years now a large majority of both groups have told us that it’s a bad time to buy a home, and they’ve continuously cited affordability concerns as the primary reason.

If mortgage rates remain elevated, many existing homeowners will likely continue to hold on to their current historically low mortgage rates, suppressing existing home listings and providing support for home prices—assuming mortgage demand maintains resilience despite the higher rate environment. Considering that existing home sales have traditionally represented approximately 85–90% of total home sales, even substantial quantities of new home production are unlikely to produce the inventory needed to meaningfully improve affordability.”