WASHINGTON—Potential homebuyers are feeling more optimistic, at least when compared to recent months.
The Fannie Mae Home Purchase Sentiment Index (HPSI) increased for the third consecutive month in January but still remains well below its pre-pandemic highs. Overall, the HPSI rose 0.6 points to 61.6, with three of the index’s six components increasing month over month, including those associated with home-selling conditions, home price outlook, and household income, Fannie Mae reported.
Only 17% of respondents believe it’s a good time to buy, likely owing to the ongoing affordability challenges posed by elevated mortgage rates and home prices. Year over year, the full index is down 10.2 points.
“January’s HPSI results showed that consumer sentiment toward the housing market remains subdued by historical standards,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “For consumers, the same affordability issues are persisting, as they continue to indicate that high home prices and high mortgage rates make it a ‘bad time to buy’ a home. The latest survey data also indicated that the majority of consumers expect home prices to decrease or remain flat over the next year, which may incentivize some potential homebuyers to delay their purchase decision.
“Although ‘good time to sell’ sentiment ticked upward this month, it’s still much lower than it was a year ago, as purchase affordability remains seriously constrained and mortgage demand has receded,” Duncan continued. “Until we see improvements in affordability via lower home prices and mortgage rates, we expect home sales to remain muted in the coming months.”
Report Highlights
According to Fannie Mae, highlights of the report include:
- Good/Bad Time to Buy. The percentage of respondents who say it is a good time to buy a home decreased from 21% to 17%, while the percentage who say it is a bad time to buy increased from 76% to 82%. As a result, the net share of those who say it is a good time to buy decreased nine percentage points month over month, Fannie Mae reported.
- Good/Bad Time to Sell. The percentage of respondents who say it is a good time to sell a home increased from 51% to 59%, while the percentage who say it’s a bad time to sell decreased from 42% to 39%. As a result, the net share of those who say it is a good time to sell increased 11 percentage points month over month, Fannie Mae said.
- Home Price Expectations. The percentage of respondents who say home prices will go up in the next 12 months increased from 30% to 32%, while the percentage who say home prices will go down remained unchanged at 37%, according to the HPSI. The share who think home prices will stay the same increased from 29% to 30%. As a result, the net share of those who say home prices will go up increased two percentage points month over month.
- Mortgage Rate Expectations. The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 14% to 13%, while the percentage who expect mortgage rates to go up increased from 51% to 52%. The share who think mortgage rates will stay the same remained increased from 31% to 33%. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased two percentage points month over month, Fannie Mae said.
- Job Loss Concern. According to Fannie Mae, the percentage of respondents who say they are not concerned about losing their job in the next 12 months remained unchanged at 82%, while the percentage who say they are concerned increased from 17% to 18%. As a result, the net share of those who say they are not concerned about losing their job remained unchanged month over month. Fannie Mae noted the share number remained unchanged due to rounding.
- Household Income. The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 25% to 22%, while the percentage who say their household income is significantly lower decreased from 15% to 10%. The percentage who say their household income is about the same increased from 59% to 67%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased two percentage points month over month, Fannie Mae said.
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