In its sixth consecutive monthly decline, the Fannie Mae Home Purchase Sentiment Index has decreased 0.8 points in August to 62.0 as high home prices and elevated mortgage rates continue to weigh on consumer sentiment. Although a small aggregate change, there was significant volatility in four of the HPSI’s six components. These included consumer perceptions of the future direction of home prices and mortgage rates as well as home buying and selling conditions.
Consumers reported that home selling conditions have worsened month over month. Respondents who say it is a good time to sell a home decreased from 67% to 59% as those who say it’s a bad time to sell increased from 27% to 35%. Concerning home buying, respondents who say it’s a bad time to buy decreased from 76% to 73%, while those who believe it’s a good time to buy a home increased from 17% to 22%. The net share of those who say it’s a good time to buy increased 8 percentage points month over month.
Consumers are neutral, or net, for the first time since the pandemic about the future of home prices with an increasing amount this month reporting that prices will go down. The percentage of respondents who say home prices will go down in the next 12 months increased from 30% to 33%, and the percentage who believe prices will go up decreased from 39% to 33%. Respondents who think home prices will remain the same increased from 26% to 28%.
“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,” says Doug Duncan, Fannie Mae senior vice president and chief economist. “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 home buyers, 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 home buyers and home sellers may be incentivized to remain on the sidelines— home buyers 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.”
The majority continues to believe that mortgage rates will increase over the next 12 months, decreasing from 67% to 61%; however, those that think mortgage rates will decline went from 6% to 11%. Those who think the mortgage rates will stay the same increased from 21% to 25%. Month over month, the net share of respondents who say that rates will go down over the next 12 months increased 11 percentage points.
The household income and job loss concern components weighed less on sentiment for August. Respondents’ household income that is significantly higher than it was 12 months ago increased from 24% to 25%, while the percentage whose household income is significantly lower increased from 13% to 15%. Regarding job loss, respondents who say they are not concerned about losing their job in the next 12 months increased from 78% to 79%, and the percentage who say they are concerned decreased from 22% to 21%. The net share of respondents who are not concerned about losing their job increased 2 percentage points month over month.
