The Fannie Mae Home Purchase Sentiment Index (HPSI) reached its lowest level since May 2020 in April, as surveyed consumers expressed heightened concerns about housing affordability and rising mortgage rates. The index decreased by 4.7 points from March to April, and the index reading of 68.5 is down 10.5 points on a year-over-year basis.
All six of the index’s components decreased month over month, with 76% of consumers indicating that they believe it is a bad time to buy a home, up from 73% in March. In addition, 73% of respondents expect mortgage rates to continue to increase over the next 12 months.
“In April, the HPSI fell to its lowest level since the first few months of the pandemic, as consumers continue to report difficult home buying conditions amid the budget-tightening constraints of inflation, higher mortgage rates, and high home price appreciation,” says Doug Duncan, Fannie Mae senior vice president and chief economist. “The current lack of entry-level supply and the rapid uptick in mortgage rates appear to be adversely impacting potential first-time home buyers, in particular, evidenced by the larger share of younger respondents (aged 18 to 34) reporting that it’s a ‘bad time to buy a home.’”
The percentage of respondents reporting it is a good time to buy a home decreased from 24% to 19% in April, according to the HPSI. Additionally, the percentage of respondents who say it is a good time to sell a home decreased from 74% to 72%.
The share of respondents expecting home prices to go up in the next 12 months decreased from 48% to 44% in April, and the share of respondents expecting prices to go down increased from 20% to 25%.
According to the HPSI, the share of respondents expecting mortgage rates to go up increased 4 percentage points month over month to 73%.
“Additionally, consumer perception regarding the ease of getting a mortgage also decreased across nearly all survey segments this month, suggesting to us that the benefit of the recent past’s historically low mortgage rate environment appears to have diminished, and affordability is poised to become an even greater constraint going forward,” Duncan says. “This sentiment is consistent with our forecast of decelerating home sales through the rest of 2022 and into 2023.”
The HPSI distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey into a single number, reflecting current views and forward-looking expectations of housing market conditions. The index is constructed from answers to six National Housing Survey questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions.
