In Oct., Fannie Mae’s sentiment index hit a record low, but it rose in Dec. due to increased expectations that mortgage rates and home prices may decrease.
WASHINGTON, DC – The Fannie MaeHome Purchase Sentiment Index (HPSI) increased 3.7 points in December to 61.0, though the index remains only slightly above its all-time low (record-keeping began in 2011) 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,” 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.”
Looking ahead in 2023, Duncan expects affordability to remain the top challenge for 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,” Duncan say. “We think the resulting tension will contribute to a continued decline in home sales in the coming months.”
Home Purchase Sentiment Index
- Good/bad time to buy: The percentage of respondents who say it’s a good time to buy a home increased from 16% to 21%; the percentage who say it’s a bad time to buy decreased from 79% to 76%.
- Good/bad time to sell: The percentage of respondents who say it’s a good time to sell a home decreased from 54% to 51%; the percentage who say it’s a bad time to sell increased from 39% to 42%.
- 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%.
- Mortgage rate expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 10% to 14%; 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%.
- Job loss concern: The percentage of respondents who aren’t 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%.
- 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%.
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