Consumer sentiment remained within the bounds of the low-level plateau that it established in the first half of 2023, according to the Fannie Mae Home Purchase Sentiment Index (HPSI). The HPSI decreased 0.6 points to 64.3 in November with consumer perceptions of home buying conditions overwhelmingly pessimistic. Overall the full HPSI is up 7 points compared with last year.
Only 14% of consumers believe it is a good time to buy a home, a new survey low according to Fannie Mae. The percentage of respondents who say it is a good time to sell a home decreased to 60% in November from 63% the previous 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, Fannie Mae senior vice president and chief economist. “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, when mortgage rates approached 7%, a plurality of consumers said they expected home prices to decrease, but that optimism has faded over the course of 2023, according to Duncan.
“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,” Duncan says. “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.”
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 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 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.”
Job security decreased in November, with the percentage of respondents who say they are not concerned about losing their job in the next 12 months decreasing to 76% from 78%. The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 20% to 19%.
