While Fannie Mae’s overall Home Purchase Sentiment Index (HPSI) remained fairly flat in May, it revealed that homebuyers are harboring an increasingly negative view of the market, thanks to high competition, low inventory and surging prices.
The HPSI increased by 1.0 points monthly to reach a reading of 80.0, with four of its six components increasing month over month. Those components are derived via answers to six survey topics, each of which gauges a different facet of the housing market.
Among the components showing improvement were those relating to job security and improved household income. The net share of Americans who say they aren’t concerned about losing their job in the next year increased 11 percentage points month over month, while the net share of those reporting “significantly higher” household income than 12 months ago grew 12 percentage points over the same timeframe.
Americans also generally believe it’s a good time to sell a home. The percentage of respondents to Fannie’s survey who believe it’s a good time to sell a home was unchanged month over month at 67%, while the share of those who say it’s a bad time was down to 25% from 26%. As a result, the net share of those who say it is a good time to sell increased 1 percentage point month over month.
However, only 35% of respondents — an all-time survey low — indicated that they believe it’s a good time to buy a home, down from 47% the prior month and 53% in March. Meanwhile, the percentage of people saying it’s a bad time to buy grew from 48% to 56%, resulting in the net share of those who say it’s a good time to buy falling 20 percentage points month over month.
“The ‘good time to buy’ component fell further … as consumers appear to be acutely aware of higher home prices and the low supply of homes, the two reasons cited most frequently for that particular sentiment,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.
“However, despite the challenging buying conditions, consumers do appear more intent to purchase on their next move, a preference that may be supported by the expectation of continued low mortgage rates, as well as the elevated savings rate during the pandemic, which may have allowed many to afford a down payment.”
The HPSI is still substantially up year over year, with its overall reading increasing 12.5% points from the level recorded in May 2020.
