Easing Mortgage Rates and Home Prices Provide Slight Boost to Homebuyer Sentiment

Rhea-AI Summary

The Fannie Mae Home Purchase Sentiment Index (HPSI) rose by 3.7 points in December 2022 to 61.0, yet remains significantly below pre-pandemic levels. Despite a slight upturn, year-over-year the index is down 13.2 points, highlighting ongoing affordability issues due to high mortgage rates and home prices. Only 21% of consumers believe it is a good time to buy a home, attributed to persisting economic concerns. As 2023 begins, affordability continues to challenge potential homebuyers, with expectations that existing homeowners will hesitate to sell until rates improve.

Positive

• HPSI increased by 3.7 points month over month.
• 21% of respondents now view it as a good time to buy, up from 16%.

Negative

• HPSI down 13.2 points year over year.
• Only 21% believe it's a good time to buy, indicating continued pessimism.
• Affordability remains a significant barrier for homebuyers.

HPSI Inched Upward in December but Remains Well Below Pre-Pandemic Highs

WASHINGTON, January 9, 2023 /PRNewswire/ -- The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index^® (HPSI) increased 3.7 points in December to 61.0, but the index remains only slightly above its all-time low set in October. Three of the index's six components improved month over month, including those associated with homebuying conditions, mortgage rate outlook, and job security. Only 21% of respondents believe it's a good time to buy, likely owing to the ongoing affordability challenges posed by elevated mortgage rates and home prices. Year over year, the full index is down 13.2 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," said 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 homebuyers, 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."

Home Purchase Sentiment Index – Component Highlights

Fannie Mae's Home Purchase Sentiment Index (HPSI) increased in December by 3.7 points to 61.0. The HPSI is down 13.2 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 increased from 16% to 21%, while the percentage who say it is a bad time to buy decreased from 79% to 76%. As a result, the net share of those who say it is a good time to buy increased 8 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 54% to 51%, while the percentage who say it's a bad time to sell increased from 39% to 42%. As a result, the net share of those who say it is a good time to sell decreased 6 percentage points month over month.
• Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months remained unchanged at 30%, while the percentage who say home prices will go down increased from 34% to 37%. The share who think home prices will stay the same decreased from 30% to 29%. As a result, the net share of those who say home prices will go up decreased 3 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 10% to 14%, while the percentage who expect mortgage rates to go up decreased from 62% to 51%. The share who think mortgage rates will stay the same remained increased from 24% to 31%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased 15 percentage points 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 increased from 78% to 82%, while the percentage who say they are concerned decreased from 21% to 17%. As a result, the net share of those who say they are not concerned about losing their job increased 8 percentage points 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 27% to 25%, while the percentage who say their household income is significantly lower decreased from 17% to 15%. The percentage who say their household income is about the same increased from 55% to 59%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago remained unchanged 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 December 2022 National Housing Survey was conducted between December 1, 2022 and December 20, 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 the ESR Group
Fannie Mae's Economic and Strategic Research Group, led by Chief Economist Doug Duncan, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets. The ESR Group was recently awarded the prestigious 2022 Lawrence R. Klein Award for Blue Chip Forecast Accuracy based on the accuracy of its macroeconomic forecasts published over the 4-year period from 2018 to 2021.

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:

fanniemae.com | Twitter | Facebook | LinkedIn | Instagram | YouTube | Blog

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https://www.fanniemae.com/news

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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 Fannie Mae HPSI figure as of January 2023?

The Home Purchase Sentiment Index (HPSI) increased to 61.0 in December 2022.

How much did the HPSI change from last year?

The HPSI is down 13.2 points compared to December 2021.

What percentage of respondents think it's a good time to buy a home?

As of December 2022, 21% of respondents believe it is a good time to buy a home.

What are the main concerns affecting potential homebuyers?

High mortgage rates and home prices continue to create affordability challenges for potential homebuyers.

What are consumer expectations for mortgage rates in the next year?

The percentage of respondents expecting mortgage rates to decrease increased from 10% to 14%.