Fannie Mae’s Home Purchase Sentiment Index® Declines in September as Mortgage Rates Climb

On Monday (10-9-23), Fannie Mae released its latest Home Purchase Sentiment Index® (HPSI). In September, the HPSI declined by 2.4 points to a reading of 64.5 as elevated mortgage rates continued to dampen already gloomy consumer housing sentiment. Five of the six HPSI components reported month-over-month declines, including those measuring perceived homebuying and home-selling conditions.

In September, 16% of consumers reported that it is a good time to buy a home, matching the all-time survey low set last year. Additionally, 63% said it was a good time to sell a home, down 3 percentage points from August. Only 17% of consumers indicated that they expect mortgage rates to decline over the next 12 months. Year-over-year, the full index is up 3.7 points.

Commenting on the HSPI report, Fannie Mae Senior Vice President and Chief Economist Doug Duncan said:

“Mortgage rates persistently over 7% appear to be deepening the malaise consumers feel about the home purchase market. In fact, high mortgage rates surpassed high home prices as the top reason why consumers think it’s a bad time to buy a home, a survey first. Notably, the share of consumers expressing pessimism about homebuying conditions hit a new survey high in September, with 84% now indicating that it’s a bad time to buy a home. On the sell side, respondents also listed unfavorable mortgage rates as the top reason why they believe it’s a bad time to sell a home. This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon, but it also may reflect the worry of some homeowners that sale values might be suppressed slightly if the pool of qualified homebuyers is constrained by elevated mortgage rates.

Consumers are also not seeing much affordability relief in sight, as they continue to expect home prices to increase in the next 12 months. They also indicated that their personal economic situations are showing signs of strain, including lower year-over-year household incomes and a reduced sense of job security. In our view, all of this points to home purchase affordability remaining a problem for the foreseeable future, which we forecast will keep home sales sluggish into next year.”