Homebuying sentiment plunges according to latest Fannie survey

Lack of purchase affordability derailing optimism; home seller confidence still healthy, but also down

With affordability presenting a seemingly insurmountable for many Americans, homebuying sentiment has fallen to a new record low, according to Fannie Mae’s Home Purchase Sentiment Index (HPSI).

The government-sponsored enterprise’s index, which evaluates consumers’ perspectives toward housing market conditions, decreased 2.5% in May, dropping to a reading of 69.4. The index reading is derived from consumer survey answers to six component questions — the most striking of which was the component measuring consumers’ attitudes on the current homebuying environment.

The percentage of respondents who say it is a good time to buy a home decreased month over month from 20% to 14%, tying a survey low last seen in November last year. On the other hand, the percentage of respondents who think it’s a bad time grew from 79% to 86%, a new survey high. That brings the net share of those who say it’s a good time to buy down 13 percentage points to -72% — also a new survey low.

“Consumer sentiment toward housing declined from its recent plateau, as an increasing share of consumers struggle to find the positives in the current housing market,” said Doug Duncan, senior vice president and chief economist at Fannie. “While many respondents expressed optimism at the beginning of the year that mortgage rates would decline, that simply hasn’t happened, and current sentiment reflects pent-up frustration with the overall lack of purchase affordability. This is most clearly evidenced by our ‘good time to buy’ component falling to a new survey low this month.”

Consumers’ views on whether conditions are favorable for selling are also on the downswing, with the share of respondents who believe it’s a good time to sell down from 67% to 64%. The percentage of those who say it’s a bad time to sell is up, meanwhile, from 32% to 35%, resulting in the net share of those who say it’s a good time to sell down 6 percentage points month over month. However, Duncan noted that the decline in perception of selling conditions is a moderate one, with sentiment still largely positive after climbing over the past few months.

“This suggests to us that, despite the so-called ‘lock-in effect,’ some homeowners may increasingly want or need to sell their homes for a myriad of non-financial reasons, which may lead to an increase in listings in the near future,” he said. “As our latest forecast notes, we expect improvements to housing inventory will lead to slightly increased sales activity through the end of the year.”

Consumers aren’t optimistic about the affordability picture improving. Fannie survey respondents believe, on net, that home prices and mortgage rates will increase over the next 12 months. Additionally, the net share of those who think prices will grow in the next year is up 2 percentage points month over month.


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