An overall lack of affordability restricted consumer sentiment in July, according to the latest Fannie Mae Home Purchase Sentiment Index (HPSI).
Following a rebound in June, the HPSI decreased 1.1 points in July to 71.5. While up 4.7 points compared to July 2023, home price expectations and job loss concern leave consumers with hesitation.
Only 17% of consumers indicated that it’s a good time to buy a home, down from 19% in June, while the share believing it’s a good time to sell decreased from 66% to 65%. The shares expecting home prices to rise versus fall over the next 12 months converged but remain some distance apart at 41% and 21%, respectively.
“While we’re seeing signs that affordability may be improving in certain parts of the country as supply slowly comes online, household incomes remain stretched relative to would-be mortgage or rent payments, and our latest survey once again reflects real consumer frustration with the housing market,” says Doug Duncan, Fannie Mae senior vice president and chief economist.
“Our recently published Mortgage Understanding Study reaffirmed what we’ve long known: that a significant majority of consumers want to own a home. However, 82% told us in July that it’s a ‘bad time’ to buy, a share that’s remained consistent since January 2023, and these respondents continue to point to elevated prices and mortgage rates as the primary reasons for that belief.
“Meanwhile, there seems to be little expectation among the general population that home buying conditions will improve in the near future: More consumers than not see home prices rising further; and slightly more consumers think mortgage rates will increase, rather than decrease, over the next 12 months.”
Twenty-nine percent of consumers expect mortgage rates to decrease over the next 12 months, while 31% expect them to increase. The share of respondents who say they are not concerned about losing their job in the next 12 months decreased from 79% to 77%, while the percentage who say they are concerned increased from 20% to 21%.
“We’re currently forecasting home price growth to decelerate through next year and mortgage rates to average 6.2% by the fourth quarter of 2025 – and, like consumers, we continue to view affordability as the primary constraint to home sales activity,” says Duncan. “One data point we think bears monitoring: The share of respondents who say they would rent, rather than buy, on their next move has been trending slowly upward of late. Right now, it’s difficult to tell if this reflects simple buyer fatigue or a greater sense of disenchantment with the market, but we think it could have important implications should the trend continue.”
Household income improved slightly with 18% saying it increased significantly higher than it was 12 months ago compared to 16% in June.
