Unaffordability Continues to Weigh Heavily on Consumer Perceptions of Housing Market

Rhea-AI Summary

Fannie Mae's Home Purchase Sentiment Index (HPSI) rose 0.6 points in January 2023 to 61.6, though it is down 10.2 points year-over-year. Only 17% of respondents feel it's a good time to buy, largely due to high mortgage rates and home prices. The majority predict home prices will decline or remain flat, influencing potential buyers to delay decisions. However, sentiment on selling improved; 59% view it as a good time to sell, up from 51%. Despite the slight uptick in the HPSI, overall consumer sentiment remains low compared to pre-pandemic levels, indicating ongoing affordability challenges in the housing market.

Positive

• HPSI increased 0.6 points month-over-month.
• 59% of respondents believe it's a good time to sell, up 11 percentage points.

Negative

• HPSI is down 10.2 points year-over-year.
• Only 17% believe it's a good time to buy, down from 21%.
• Expectations for mortgage rates to increase rose to 52%.

Elevated Mortgage Rates and Home Prices Are Dampening Consumer Opinion of Home Purchase Conditions

WASHINGTON, Feb. 7, 2023 /PRNewswire/ -- The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index^® (HPSI) increased for the third consecutive month in January but still remains well below its pre-pandemic highs. Overall, the HPSI rose 0.6 points to 61.6, with three of the index's six components increasing month over month, including those associated with home-selling conditions, home price outlook, and household income. Only 17% 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 10.2 points.

"January's HPSI results showed that consumer sentiment toward the housing market remains subdued by historical standards," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. "For consumers, the same affordability issues are persisting, as they continue to indicate that high home prices and high mortgage rates make it a 'bad time to buy' a home. The latest survey data also indicated that the majority of consumers expect home prices to decrease or remain flat over the next year, which may incentivize some potential homebuyers to delay their purchase decision. Although 'good time to sell' sentiment ticked upward this month, it's still much lower than it was a year ago, as purchase affordability remains seriously constrained and mortgage demand has receded. Until we see improvements in affordability via lower home prices and mortgage rates, we expect home sales to remain muted in the coming months."

Home Purchase Sentiment Index – Component Highlights

Fannie Mae's Home Purchase Sentiment Index (HPSI) increased in January by 0.6 points to 61.6. The HPSI is down 10.2 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 decreased from 21% to 17%, while the percentage who say it is a bad time to buy increased from 76% to 82%. As a result, the net share of those who say it is a good time to buy decreased 9 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 increased from 51% to 59%, while the percentage who say it's a bad time to sell decreased from 42% to 39%. As a result, the net share of those who say it is a good time to sell increased 11 percentage points month over month.
• Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months increased from 30% to 32%, while the percentage who say home prices will go down remained unchanged at 37%. The share who think home prices will stay the same increased from 29% to 30%. As a result, the net share of those who say home prices will go up increased 2 percentage points month over month.
• Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 14% to 13%, while the percentage who expect mortgage rates to go up increased from 51% to 52%. The share who think mortgage rates will stay the same remained increased from 31% to 33%. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased 2 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 remained unchanged at 82%, while the percentage who say they are concerned increased from 17% to 18%. As a result, the net share of those who say they are not concerned about losing their job remained unchanged month over month. Note: Net share number remained unchanged due to rounding.
• Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 25% to 22%, while the percentage who say their household income is significantly lower decreased from 15% to 10%. The percentage who say their household income is about the same increased from 59% to 67%. 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 National Housing Survey (NHS) is a monthly attitudinal survey, launched in 2010, which polls the adult general population of the United States to assess their attitudes toward owning and renting a home, purchase and rental prices, household finances, and overall confidence in the economy. Each respondent is asked more than 100 questions, making the NHS one of the most detailed attitudinal longitudinal surveys of its kind, 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 January 2023 National Housing Survey was conducted between January 3, 2023 and January 20, 2023. Most of the data collection occurred during the first two weeks of this period. In January 2023, the NHS was conducted exclusively through AmeriSpeak^®, NORC at the University of Chicago's probability-based panel, 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 current Home Purchase Sentiment Index for FNMA?

The Home Purchase Sentiment Index for FNMA is 61.6 as of January 2023.

How did FNMA's Home Purchase Sentiment Index change from last year?

The HPSI is down 10.2 points compared to January 2022.

What percentage of consumers think it's a good time to buy a home according to FNMA?

Only 17% of consumers believe it's a good time to buy a home.

What is the consumer sentiment regarding home selling for FNMA?

59% of respondents feel it's a good time to sell a home, an increase from 51%.

How are consumer expectations for mortgage rates changing according to FNMA?

52% of consumers expect mortgage rates to increase over the next 12 months.