Only 14% of U.S. consumers think now is a good time to buy a home, according to the latest Fannie Mae Home Purchase Sentiment Index (HPSI).
That’s the most pessimistic view of the housing market since the inception of the report, Fannie Mae says.
The percentage of respondents who say it is a good time to sell a home decreased from 63% to 60%, while the percentage who say it’s a bad time to sell increased from 37% to 40%. As a result, the net share of those who say it is a good time to sell decreased 5 percentage points month over month.
Most respondents to the survey also continue to expect both home prices and mortgage rates to increase over the next 12 months.
The percentage of respondents who say home prices will go up in the next 12 months increased from 40% to 41%, while the percentage who say home prices will go down increased from 23% to 24%. The share who think home prices will stay the same decreased from 36% to 35%. As a result, the net share of those who say home prices will go up in the next 12 months remained unchanged month over month.
The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 16% to 22%, while the percentage who expect mortgage rates to go up decreased from 47% to 44%. The share who think mortgage rates will stay the same decreased from 36% to 34%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased 8 percentage points month over month.
“Over the past year, the HPSI has plateaued at a low level, evidence of persistent consumer pessimism regarding the state of the housing market,” says Doug Duncan, Senior Vice President and Chief Economist for Fannie Mae, in the report. “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 percent, 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 says. “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 adds.
Along with the dismal view of the housing market, most respondents have a similarly gloomy view of the overall economy.
However, most consumers are currently not concerned about losing their jobs. The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 78% to 76%, while the percentage who say they are concerned increased from 21% to 23%. As a result, the net share of those who say they are not concerned about losing their job decreased 4 percentage points month over month.
The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 20% to 19%, while the percentage who say their household income is significantly lower increased from 10% to 12%. The percentage who say their household income is about the same decreased from 69% to 68%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 3 percentage points month over month.
“The combination of persistent affordability challenges and less rosy household finances remain the primary drivers of the low-level plateauing of housing sentiment,” Duncan says. “Even if mortgage rates decline over the next year, which we currently expect, it’s unlikely to meaningfully affect affordability. 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.”