The Fannie Mae Home Purchase Sentiment Index (HPSI) decreased by 2.1 points to 73.2 in March, as consumers express pessimism regarding mortgage rates and home buying conditions generally. On a year-over-year basis, the index is down 8.5 points. Four of the index’s six components decreased on a month-over-month basis in March, including components asking consumers whether they expect mortgage rates to increase and whether they believe it is a good time to buy a home.
In March, a survey-high 69% of respondents indicated they expect mortgage rates to continue increasing. Additionally, the “Good Time to Buy” component set a new survey low, with 73% of respondents reporting it is a bad time to buy a home.
“The ‘Good Time to Buy’ component of the index reached yet another record low, with high home prices, rising mortgage rates, and macroeconomic uncertainty serving as consumers’ chief concerns,” says Mark Palim, Fannie Mae vice president and deputy chief economist. “Only 24% of consumers believe it’s a good time to buy a home, with similar levels of pessimism expressed by nearly all of the demographic groups surveyed.”
According to the HPSI, the consumers believe it remains a good time to be a home seller. The percentage of respondents who say it's a good time to sell a home increased from 72% to 74% in March, while the percentage who say it’s a bad time to sell decreased from 22% to 21%.
The share of consumers expecting home prices to increase in the next 12 months increased in March. The HPSI also found the net share of Americans who say they are not concerned about losing their job decreased 3 percentage points month over month.
“This month, we also saw a survey-high share of consumers expecting their financial situations to worsen over the next year; this was especially true among current homeowners,” Palim says. “These concerns, together with the run-up in mortgage rates since the end of 2021, will likely diminish mortgage demand from move-up buyers—and fewer move-up buyers mean fewer available entry-level homes, adding to the rising rate challenges for potential first-time home buyers.”
Palim says if consumer pessimism toward home buying conditions continues to trend downward and the recent mortgage rate increases are sustained, then Fannie Mae expects “an even greater cooling of the housing market than previously forecast.”
The HPSI distills information about consumers’ home purchase sentiment from Fanne Mae’s National Housing Survey into a single number, reflecting current views and forward-looking expectations of housing market conditions. The index is constructed from answers to six National Housing Survey questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions.
