Fannie Mae’s Home Purchase Sentiment Index® Posts Modest Gain in December

Fannie Mae on Monday (1-9-23) reported its Home Purchase Sentiment Index® (HPSI) for December had increased 3.7 points to a reading of 61.0. The index, however, remains only slightly above its all-time record low, which was set in October 2022. Three of the index’s six components posted month-over-month improvements, including those associated with homebuying conditions, mortgage rate outlook, and job security. Year-over-year, the HPSI full index is down 13.2 points.

Only 21% of the respondents surveyed believe it’s a good time to buy, likely owing to the ongoing affordability challenges posed by elevated mortgage rates and home prices.

Adding additional background to the HPSI and his analysis, Fannie Mae’s Senior Vice President and Chief Economist Dr. Doug Duncan said:

“In December, the HPSI inched upward slightly, as consumers reported increased expectations that mortgage rates and home prices may decrease over the next year—perhaps reflecting recently observed declines in mortgage rates and average home prices. However, the HPSI remains very low by historical standards, particularly the ‘good time to buy’ component, and respondents continue to cite high home prices and unfavorable mortgage rates as the primary reasons for their pessimism.

As we enter 2023, we expect affordability to remain the top challenge for potential homebuyers, as even small declines in rates and home prices—from the perspective of the buyer—may not produce sufficient purchasing power. At the same time, existing homeowners may continue to wait to list their properties, since many have already locked in lower mortgage rates, creating minimal incentive to sell and buy again until rates are more favorable. We think the resulting tension will contribute to a continued decline in home sales in the coming months.”