Consumer sentiment toward housing decreased to its lowest level since 2011 in July, according to the Fannie Mae Home Purchase Sentiment Index (HPSI). The HPSI dropped 2 points on a month-over-month basis to a reading of 62.8 last month.
Surveyed consumers continued to express pessimism toward home buying conditions. Only 17% of respondents reported it is a good time to buy a home. The percentage of respondents reporting it is a good time to sell a home has been decreasing in recent months, with 67% reporting selling conditions as good in July, down from 76% as recently as May.
Four of the HPSI’s six components decreased on a month-over-month basis, including the component associated with home price growth expectations. On a year-over-year basis, the overall index is down 13 points.
“The HPSI has declined steadily for much of the year, as higher mortgage rates continue to take a toll on housing affordability,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “Unfavorable mortgage rates have been increasingly cited by consumers as a top reason behind the growing perception that it’s a bad time to buy, as well as sell, a home.”
Duncan says the “good time to sell” component of the index has “declined meaningfully” over the past two months, suggesting selling conditions are softening. Additionally, the net share of Americans who believe home prices will go up decreased 8 percentage points month over month in July.
“With home price growth slowing, and projected to slow further, we believe consumer reaction to current housing conditions is likely to be increasingly mixed: Some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential home buyers may choose to postpone their purchase decision believing that home prices may drop,” Duncan says. “Overall, this month’s HPSI results appear to confirm our forecast for moderating home sales over the coming year.”
According to the HPSI, the share of respondents who said mortgage rates will go down in the next 12 months increased from 5% to 6%, while the share who believe mortgage rates will go up remained unchanged month over month at 67%. The net share of Americans who are not concerned about losing their job decreased 1 percentage point month over month in July, while the net share of those who say their household income is slightly higher than it was 12 months ago increased 2 percentage points.
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.
