Another decrease in Fannie Mae’s Home Purchase Sentiment Index

Fannie Mae’s Home Purchase Sentiment Index (HPSI) saw its sixth straight monthly decline in August, falling 0.8 points from July to a reading of 62.0.

The government-sponsored enterprise noted that while the overall HPSI (which reflects consumer views and expectations of housing market conditions) receded only slightly, its components saw considerable volatility. The overall index reading is derived from consumer survey answers to six questions related to buying and selling homes, with net readings on four of these six questions seeing substantial swings.

The largest shift was seen in the component question that tracks consumer views on home selling conditions. The percentage of survey participants who indicated that it’s a good time to sell a home decreased from 67% to 59%, while the share who said it’s a bad time rose from 27% to 35% — resulting in a monthly net decrease of 16 percentage points for those who say it’s a good time to sell.

Conversely, the number of respondents who said it’s a good time to buy a home was up from 17% in July to 22% in August, while the percentage who said it’s a bad time to buy declined from 76% to 73%. The net share of people who said it’s a good time to buy was up 8 percentage points month over month as a result.

Other large changes to index components included a drop of 9 percentage points in consumers who believe home prices will go up, as well as an 11-point jump in consumers who think mortgage rates will decrease in the next 12 months.

The other two component questions of the survey, addressing job-loss concerns and household income, experienced only moderate shifts.

“The share of consumers expecting home prices to go down over the next year increased substantially in August,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Accompanying this, HPSI respondents reported a significant decrease in home selling sentiment.

“We also observed a large decline in consumers reporting high home prices as the primary reason for it being a good time to sell a home, suggesting that expectations of slowing or declining home prices have begun to negatively affect selling sentiment. Conversely, lower home prices would obviously be welcome news for potential first-time homebuyers, who are likely feeling the combined affordability constraints of the high home price and high mortgage rate environment.”

Fannie also noted that, with more home price moderation forecast and the national economy still uncertain, both buyers and sellers may be incentivized to stay on the sidelines for now. Buyers may look to wait for increased affordability while sellers hang on to homes and mortgages with lower fixed rates. Such psychology would intensify the cooling of home sales toward the end of the year.


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