Fannie Mae today (1-7-22) released their Home Purchasing Sentiment Index® (HPSI) for December. According to the report, the HPSI declined 0.5 points to a reading of 74.2 in December. This occurred as consumers continue to report conflicting views of homebuying and home-selling conditions.
Three of the six HPSI components decreased month-over-month. In December, 76% of respondents reported that it is a good time to sell a home. This is compared to a survey record-low of 26% of consumers responding who thought it was a good time to purchase a home. By comparison, in December 2020, 50% of respondents believed it was a good time to sell, while 52% believed it was a good time to buy. Year over year, the full HPSI index is up 0.2 points.
In regard to home price expectations, the percentage of respondents who thought home prices will increase in the next 12 months declined slightly, going from 45% to 44%. Respondents who believe that home prices will decline in the next 12 months decreased from 21% to 19%, while the share of respondents who thought prices would remain unchanged in the next 12 months increased from 28% to 30%.
In a statement prepared for the December HPSI, Doug Duncan, Fannie Mae’s Senior VP and Chief Economist said:
“The HPSI’s underlying components changed dramatically in the last 12 months — particularly the two related to homebuying and home-selling sentiment — and we have seen the index drift slightly downward since March 2021, an indication that the housing market may begin to soften in the coming year. Over the past year, low mortgage rates plus government stimulus programs helped increase mortgage demand, but the bidding-up of homes increased prices to record levels, making affordability a greater constraint for both first-time and move-up homebuyers. Among homeowners, the ‘good time to buy’ sentiment fell 30 percentage points over the past year to its current level of 30%; for renters it fell from 37% to 21%. Even though demand remains strong, a majority of consumers clearly have reservations about purchasing a home at current prices.”
“We currently expect mortgage rates to continue to drift modestly upward through year end, despite inflation concerns, which will likely compound the affordability concerns expressed by consumers in the HPSI. Recent MBS issuance data indicating a rise in average debt-to-income levels also backstop that concern, suggesting additional affordability constraints. Combined with our survey results showing rising expectations for higher rent prices among consumers, we believe some would-be renters may look to accelerate their home purchase timeline, helping to drive continued strong (though decelerating) home price growth. We do expect an increase in new homes to come to market later in 2022, which should provide some supply relief; however, it may not be enough to meaningfully affect home prices. As such, affordability is likely to be a growing challenge over the coming year.”
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Softening HPSI May Portend Slower Housing Market in 2022