Would-Be Homebuyers Feeling Squeeze of Higher Home Prices and Mortgage Rates

Rhea-AI Summary

Fannie Mae's Home Purchase Sentiment Index (HPSI) slightly decreased by 0.3 points in May to 68.2, marking a year-over-year decline of 11.8 points. Notably, only 17% of consumers believe it's a good time to buy a home, while 79% deem it a bad time. Concerns about rising mortgage rates are prevalent, with 70% expecting continued increases. Job security worries also rose, with 16% of respondents expressing pessimism. The index reflects ongoing challenges including affordability and inflation, suggesting that home sales may significantly slow down.

Positive

• The percentage of respondents indicating it's a good time to sell a home increased from 72% to 76%.
• Expectations for home prices to increase rose from 44% to 47%.
• The net share of Americans who think mortgage rates will decrease increased by 2 percentage points month over month.

Negative

• The 'Good Time to Buy' indicator hit a new survey low, with only 17% of consumers responding positively.
• Year-over-year, the HPSI is down 11.8 points, highlighting significant consumer pessimism.
• Concerns about job loss rose from 11% to 16%, indicating increasing financial anxiety among consumers.
• The percentage of respondents believing it's easy to get a mortgage decreased across almost all segments.

Only 17% of Consumers Report It's a 'Good Time to Buy' a Home

WASHINGTON, June 7, 2022 /PRNewswire/ -- The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index^® (HPSI) remained relatively flat in May, decreasing by only 0.3 points but inching nearer its 10-year- and pandemic-low of 63.0 from April 2020. Surveyed consumers continue to express concerns about housing affordability, with the "Good Time to Buy" indicator reaching a new survey low, as 79% of respondents reported that it's a bad time to buy a home. Additionally, 70% of respondents expect mortgage rates to continue their recent ascent over the next 12 months. A greater share of consumers also expressed concern that they may lose their job in the next 12 months, but that component remains firmly positive generally, with only 16% of consumers expressing pessimism. Year over year, the full index is down 11.8 points.

"Consumers' expectations that their personal financial situations will worsen over the next year reached an all-time high in the May survey, and they expressed greater concern about job security," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. "Further, respondents' pessimism regarding homebuying conditions carried forward into May, with the percentage of respondents reporting it's a bad time to buy a home hitting a new survey high. The share reporting that it's 'easy to get a mortgage' also decreased across almost all segments."

Duncan continued: "These results suggest to us that increased mortgage rates, high home prices, and inflation will likely continue to squeeze would-be homebuyers – as well as those potential sellers with lower, locked-in mortgage rates – out of the market, supporting our forecast that home sales will slow meaningfully through the rest of this year and into next."

Home Purchase Sentiment Index – Component Highlights

Fannie Mae's Home Purchase Sentiment Index (HPSI) decreased in May by 0.3 points to 68.2. The HPSI is down 11.8 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 19% to 17%, while the percentage who say it is a bad time to buy increased from 76% to 79%. As a result, the net share of those who say it is a good time to buy decreased 5 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 72% to 76%, while the percentage who say it's a bad time to sell decreased from 21% to 19%. As a result, the net share of those who say it is a good time to sell increased 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 increased from 44% to 47%, while the percentage who say home prices will go down decreased from 25% to 23%. The share who think home prices will stay the same decreased from 26% to 25%. As a result, the net share of Americans who say home prices will go up increased 5 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 5% to 4%, while the percentage who expect mortgage rates to go up decreased from 73% to 70%. The share who think mortgage rates will stay the same increased from 18% to 20%. As a result, the net share of Americans who say mortgage rates will go down over the next 12 months increased 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 decreased from 84% to 81%, while the percentage who say they are concerned increased from 11% to 16%. As a result, the net share of Americans who say they are not concerned about losing their job decreased 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 remained unchanged at 26%, while the percentage who say their household income is significantly lower increased from 14% to 16%. The percentage who say their household income is about the same decreased from 56% to 54%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 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 May 2022 National Housing Survey was conducted between May 1, 2022 and May 23, 2022. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by PSB, 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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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 (HPSI) for FNMA?

The HPSI for FNMA is currently 68.2, showing a slight decrease of 0.3 points in May.

How many 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, while 79% think it's a bad time.

What are the mortgage rate expectations reported by FNMA?

70% of respondents expect mortgage rates to rise further over the next 12 months.

How does the current HPSI compare to last year for FNMA?

The HPSI is down 11.8 points compared to the same time last year.

What concerns do consumers have about job security according to FNMA?

Concerns about job loss increased from 11% to 16%, indicating heightened anxiety among consumers.