Consumer Sentiment Toward Housing at Lowest Level in Decade

Rhea-AI Summary

Fannie Mae's Home Purchase Sentiment Index (HPSI) fell 2.0 points in July 2022 to 62.8, marking the lowest level since 2011 and down 13.0 points year-over-year. Only 17% of consumers view homebuying as favorable, while those considering it a bad time increased to 76%. The sentiment surrounding home selling also declined, from 76% in May to 67% in July. Expectations for home price growth weakened significantly, with those anticipating an increase dropping from 44% to 39%. All these factors indicate increasing consumer pessimism in the housing market due to rising mortgage rates.

Positive

• The HPSI remains positive on net regarding consumer expectations for home price growth despite recent decreases.

Negative

• The HPSI at 62.8 is the lowest since 2011, indicating significant consumer pessimism.
• Only 17% of respondents believe it is a good time to buy a home, down from 20%.
• The percentage of consumers viewing home selling conditions as favorable decreased to 67%, reflecting declining market confidence.
• Expectations for home price growth decreased significantly, with only 39% expecting prices to rise, down from 44%.
• Rising mortgage rates are increasingly viewed as a deterrent for homebuying, impacting overall housing market sentiment.

Latest HPSI Reading Shows Consumers Increasingly Concerned by Both Homebuying and Home-Selling Conditions

WASHINGTON, Aug. 8, 2022 /PRNewswire/ -- The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index^® (HPSI) decreased 2.0 points in July to 62.8, its lowest level since 2011 and well below the all-time high set in 2019. Surveyed consumers continue to express pessimism about homebuying conditions, with only 17% of respondents reporting it's a good time to buy a home. Meanwhile, the percentage of consumers believing it's a good time to sell has begun ticking downward in recent months, falling from 76% in May to 67% in July. Overall, four of the index's six components decreased month over month, including the component associated with home price growth expectations, which has fallen meaningfully over the past few months but remains positive on net. Year over year, the full index is down 13.0 points.

"The HPSI has declined steadily for much of the year, as higher mortgage rates continue to take a toll on housing affordability," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. "Unfavorable mortgage rates have been increasingly cited by consumers as a top reason behind the growing perception that it's a bad time to buy, as well as sell, a home. Additionally, consumers appear to be indicating that selling conditions are softening, as the 'Good Time to Sell' component has declined meaningfully over the past two months, and, on net, fewer consumers expect home prices to go up. With home price growth slowing, and projected to slow further, we believe consumer reaction to current housing conditions is likely to be increasingly mixed: Some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential homebuyers may choose to postpone their purchase decision believing that home prices may drop. Overall, this month's HPSI results appear to confirm our forecast for moderating home sales over the coming year."

Home Purchase Sentiment Index – Component Highlights

Fannie Mae's Home Purchase Sentiment Index (HPSI) decreased in July by 2.0 points to 62.8. The HPSI is down 13.0 points compared to the same time last year. Read the full research report for additional information.

• Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home decreased from 20% to 17%, while the percentage who say it is a bad time to buy increased from 75% to 76%. As a result, the net share of those who say it is a good time to buy decreased 4 percentage points month over month.
• Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home decreased from 68% to 67%, while the percentage who say it's a bad time to sell increased from 26% to 27%. As a result, the net share of those who say it is a good time to sell decreased 2 percentage points month over month.
• Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 44% to 39%, while the percentage who say home prices will go down increased from 27% to 30%. The share who think home prices will stay the same increased from 23% to 26%. As a result, the net share of Americans who say home prices will go up decreased 8 percentage points month over month.
• Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 5% to 6%, while the percentage who expect mortgage rates to go up remained unchanged at 67%. The share who think mortgage rates will stay the same remained unchanged at 21%. As a result, the net share of Americans who say mortgage rates will go down over the next 12 months increased 1 percentage point month over month.
• Job Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months remained unchanged at 78%, while the percentage who say they are concerned increased from 21% to 22%. As a result, the net share of Americans who say they are not concerned about losing their job decreased 1 percentage point month over month.
• Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 25% to 24%, while the percentage who say their household income is significantly lower decreased from 16% to 13%. The percentage who say their household income is about the same increased from 58% to 61%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased 2 percentage points month over month.

About Fannie Mae's Home Purchase Sentiment Index
The Home Purchase Sentiment Index® (HPSI) distills information about consumers' home purchase sentiment from Fannie Mae's National Housing Survey® (NHS) into a single number. The HPSI reflects consumers' current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers' evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

About Fannie Mae's National Housing Survey
The most detailed consumer attitudinal survey of its kind, Fannie Mae's National Housing Survey (NHS) polled approximately 1,000 respondents via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). For more information, please see the Technical Notes. Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to support the housing market. The July 2022 National Housing Survey was conducted between July 1, 2022 and July 21, 2022. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by ReconMR on behalf of PSB Insights and in coordination with Fannie Mae.

Detailed HPSI & NHS Findings
For detailed findings from the Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results.

To receive e-mail updates with other housing market research from Fannie Mae's Economic & Strategic Research Group, please click here.

About Fannie Mae
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:
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Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group or survey respondents included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group or survey respondents as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

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SOURCE Fannie Mae

FAQ

What is the latest Home Purchase Sentiment Index (HPSI) from Fannie Mae?

The latest HPSI from Fannie Mae decreased to 62.8 in July 2022, the lowest level since 2011.

How did consumer sentiment change regarding homebuying in July 2022?

In July 2022, only 17% of consumers thought it was a good time to buy a home, down from 20%.

What were the findings on home price expectations in the latest HPSI report?

The percentage of respondents expecting home prices to rise decreased from 44% to 39% in July 2022.

How have selling conditions changed according to the HPSI?

The percentage of consumers considering it a good time to sell decreased from 76% in May to 67% in July 2022.

What impact are rising mortgage rates having on consumer sentiment?

Rising mortgage rates are increasingly perceived as a reason for the negative outlook on both buying and selling homes.