WASHINGTON–Consumers remain “overwhelmingly pessimistic” when it comes to purchasing a house, according to the newest Fannie Mae Home Purchase Sentiment Index (HPSI).
The index decreased 0.6 points in November, with Fannie Mae saying it remains within the bounds of the low-level plateau it established in the first half of 2023. The survey found just 14% of consumers believe it’s a good time to buy a home, a new survey low.
According to Fannie Mae, pluralities of respondents also continue to expect both home prices and mortgage rates to increase over the next 12 months. Overall, the full index is up 7.0 points compared to last year.
“Over the past year, the HPSI has plateaued at a low level, evidence of persistent consumer pessimism regarding the state of the housing market,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “Looking back, consumer belief that it’s a ‘bad time to buy a home’ hit a survey high several times this year – including this month – and each time the pessimism could be attributed to high home prices and high mortgage rates. At the end of 2022, as mortgage rates approached 7%, a rate level not seen in over a decade, a plurality of consumers said they expected home prices to decrease; however, that optimism faded over the course of 2023.”
Duncan said a “significant majority” of respondents have also continued to expect mortgage rates to increase or stay the same, though these expectations have tempered over the year. At the same time, consumers have expressed a reduced sense of financial security, with fewer respondents reporting household income growth over the year and a higher percentage saying their incomes remained the same, he added.
‘Less Rosy’
“The combination of persistent affordability challenges and less rosy household finances remain the primary drivers of the low-level plateauing of housing sentiment. Even if mortgage rates decline over the next year, which we currently expect, it’s unlikely to meaningfully affect affordability,” Duncan continued. “The lack of housing inventory is likely to remain a challenge for some time, and home purchase sentiment may continue to be suppressed as a result. As our forecast indicates, we believe it will be a couple years before homes sales return to more normal, pre-pandemic levels.”
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