The Fannie Mae Home Purchase Sentiment Index (HPSI) increased 3.7 points in December to 61 but remains down 13.2 points year over year. While the HPSI remains only slightly above its all-time low set in October, three of the six index components improved month over month. Those components were associated with home buying conditions, mortgage rate outlook, and job security.
The percentage of respondents who say it’s a bad time to buy decreased from 79% to 76%, and those who say it is a good time to buy a home increased from 16% to 21%. The net share of those who say it is a good time to buy increased 8 percentage points month over month.
In terms of selling, the percentage of respondents who say it is a good time to sell a home decreased from 54% to 51%, while the percentage who say it’s a bad time to sell increased from 39% to 42%. Month over month, the net share of those who say it is a good time to sell decreased 6 percentage points.
“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,” says Doug Duncan, Fannie Mae senior vice president and chief economist. “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 home buyers, 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.”
The percentage of those who say home prices will go up in the next 12 months remained unchanged at 30%, and those you believe home prices will go down increased from 34% to 37%. Respondents who say homes prices will stay the same decreased 1 percentage point to 29%. The net share of those who say home prices will go up decreased 3 percentage points month over month.
Mortgage rate expectations leaned positively as respondents who say mortgage rates will go down in the next 12 months increased from 10% to 14%, while the percentage who expect mortgage rates to go up decreased from 62% to 51%. Those who think rates will stay the same increased from 24% to 31%. Month over month, the net share of respondents who say mortgage rates will go down over the next 12 months increased 15 percentage points.
Those who say they are not concerned about losing their job in the next 12 months increased from 78% to 82%, while those who are concerned decreased from 21% to 17%. The net share of those who are not concerned about losing their job increased 8 percentage points month over month.
The household income component’s net share of those who say their household income is significantly higher than it was 12 months ago remained unchanged month over month. Respondents who say their household income is significantly higher than it was 12 months ago decreased from 27% to 25%, and the percentage who say their household income is significantly lower decreased from 17% to 15%, while those with unchanged income increased from 55% to 59%.
The HPSI consolidates information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey (NHS) into a single number. Using answers from six NHS questions, the HPSI reflects current and forward-looking expectations of housing market conditions and complements existing data sources.