Even with interest rates and home price growth both trending downward, the persistent lack of affordability continues to impede consumer confidence in the housing market, Fannie Mae’s latest Home Purchase Sentiment Index (HPSI) revealed.
The share of respondents to Fannie’s HPSI survey who think it’s currently a good time to buy a home keeps retreating. In July, just 17% of consumers believe there are favorable conditions for a home purchase, down from 19% in June. Conversely, the share who believe it’s a bad time to buy is up from 81% in June to 82% in July.
The share believing it’s a good time to sell is also down, ebbing to 65% from 66% one month prior. On the flip side, the share who think it’s a bad time to sell is marginally up, from 33% in June to 34% in July.
Concerns about job security appear to be on a gradual rise as well. The share of respondents who aren’t concerned about losing their jobs in the next year is down from 79% to 77%. And while the percentage of respondents who reported a significantly higher household income in July than it was 12 months ago is up from 16% to 18%, the share of those who say their household income is significantly lower also increased from 10% to 11%.
“While we’re seeing signs that affordability may be improving in certain parts of the country as supply slowly comes online, household incomes remain stretched relative to would-be mortgage or rent payments, and our latest survey once again reflects real consumer frustration with the housing market,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Our recently published Mortgage Understanding Study reaffirmed what we’ve long known: that a significant majority of consumers want to own a home. However, 82% told us in July that it’s a ‘bad time’ to buy, a share that’s remained consistent since January 2023, and these particular respondents continue to point to elevated prices and mortgage rates as the primary reasons for that belief.
“Meanwhile, there seems to be little expectation among the general population that homebuying conditions will improve in the near future: More consumers than not see home prices rising further; and slightly more consumers think mortgage rates will increase, rather than decrease, over the next 12 months.”
Consumers are at least noticing that home price growth is softening, with the share who believe home prices will go up in the next 12 months falling from 45% in June to 41% in July. The percentage who say prices will go down is increasing as well, jumping from 17% to 21%.
“We’re currently forecasting home price growth to decelerate through next year and mortgage rates to average 6.2% by the fourth quarter of 2025 — and, like consumers, we continue to view affordability as the primary constraint to home sales activity,” Duncan said. “One data point we think bears monitoring: The share of respondents who say they would rent, rather than buy, on their next move has been trending slowly upward of late. Right now, it’s difficult to tell if this reflects simple buyer fatigue or a greater sense of disenchantment with the market, but we think it could have important implications should the trend continue.”
The trend of consumers favoring rentals to homebuying is in line with recent data from Redfin, which reported that the growth of renter households is outpacing that of homeowner households by threefold.
