Consumer confidence in the housing market fell 1.8 points in February to a score of 71.6 on Fannie Mae’s Home Purchase Sentiment Index (HSPI), due mainly to increased pessimism that mortgage rates will go down in the next year.
The share of consumers who say it is a good time to buy a home inched up last month to 24%, while the share who say it is a good time to sell dipped to 62%.
February also saw a notable decline in consumers’ optimism toward their personal financial situation, including household income and concern they could lose their job.
Year over year, the index is down 1.2 points.
“In February, the HPSI saw its first year-over-year decline in nearly two years, which was mostly due to a shrinking share of consumers expressing optimism about the direction of mortgage rates,” says Mark Palim, senior vice president and chief economist for Fannie Mae, in a statement. “This growing pessimism makes sense, as mortgage rates had remained near the 7 percent threshold for a few months, including when we fielded this survey.”
The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 35% to 30%, while the percentage who expect mortgage rates to go up increased from 32% to 33%.
“The decline in sentiment was further impacted by consumers’ growing concerns about their own personal financial situations,” Palim says.
The percentage of employed survey respondents who say they are not concerned about losing their job in the next 12 months decreased from 78% to 77%, while the percentage who say they are concerned increased from 22% to 23%.
The share of respondents who say their household income is significantly higher than it was 12 months ago increased from 17% to 18%, while the percentage who say their household income is significantly lower increased from 9% to 11%.
The percentage of respondents who say home prices will go up in the next 12 months decreased from 43% to 41%, while the percentage who say home prices will go down increased from 22% to 23%.
“While some consumers may be slowly acclimating to the higher mortgage rate environment, the vast majority continue to believe it is a ‘bad time’ to buy a home – with high home prices cited as the primary sticking point,” Palim says. “We continue to expect home sales activity to remain relatively light over our forecast horizon due to the ongoing lack of supply and overall unaffordability.”
Photo: Karsten Winegeart