The Fannie Mae Home Purchase Sentiment Index (HPSI) decreased for the seventh consecutive month amid growing affordability constraints, reaching its lowest level since October 2011. The HPSI decreased 1.2 points in September to an index reading of 60.8. On a year-over-year basis, the full index is down 13.7 points
Surveyed consumers reported expectations that mortgage rates will move higher over the next 12 months. The share of consumers who expect getting a mortgage would be easy increased 3 percentage points month over month to 49%, while the share of those who expect it would be difficult decreased 5 percentage points to 45%.
For the first time since May 2020, a larger share of respondents expect home prices to decline in the next 12 months than expect prices to increase (32% expect home prices to go up; 35% expect home prices to go down). On average, consumers expect rental prices to increase 6.2% over the next 12 months and home prices to decrease 1.1% over the same period, according to Fannie Mae.
Only 19% of consumers in September indicated it is a good time to buy a home, down from 22% in August. Fifty-nine percent of respondents reported it is a good time to sell a home.
“The HPSI declined this month to its lowest level since October 2011,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “Consumers’ expectation that home prices will decrease matched a survey high, with a higher percentage of consumers believing home prices will decrease rather than increase over the next year—a shift in survey sentiment that had previously only happened in 2011 and at the start of the pandemic in 2020.”
In September, the share of consumers reporting it is a bad time to buy a home increased 2 percentage points to 75%. The net share of consumers reporting it is a good time to buy decreased 5 percentage points month over month in September. According to Duncan, most consumers cited high home prices and unfavorable economic and mortgage rate conditions as the primary reasons it is a bad time to buy a home.
“As long as supply is limited and affordability pressures continue to constrain potential home buyers via elevated home prices and mortgage rates, we expect home sales will remain sluggish,” says Duncan.
The percentage of respondents who are not concerned about losing their job in the next 12 months decreased 1 percentage point month over month to 78%, while the percentage who are concerned remained unchanged at 21%, according to Fannie Mae. The percentage of respondents who reported their household income is “significantly lower” than 12 months ago decreased 4 percentage points to 11%.
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.
