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High Prices, Short Supply Leads to Homebuyers’ Hesitancy

A serious dearth of inventory and elevated real estate prices continue to make the prospect of home shopping and homebuying too daunting for a majority of Americans today, according to Fannie Mae's Home Purchase Sentiment Index (HPSI) [1]. In fact, consumers' pessimism toward homebuying conditions in July set a survey record. Of the six metrics measured in the report, the "Good Time to Buy" and "Good Time to Sell" components once again produced the most notable results, reported the government-sponsored enterprise's economics team. On the buy-side, 66% of respondents said it's a bad time to buy a home, up from 64% last month; while on the sell-side, 75% of respondents said it's a good time to sell, down slightly from 77 % last month, yet still elevated compared to pre-coronavirus times.

"Historically prime homebuying groups appear to be increasingly sensitive to the lack of affordability, as home prices continue to increase and homes for sale remain in short supply," said Doug Duncan, Fannie Mae SVP and Chief Economist. "While all surveyed consumer segments have reported increased pessimism toward homebuying conditions over the past several months, two of the segments perhaps best positioned to purchase—consumers aged 35-44 and those with middle-to-higher income levels—have indicated even more pessimism than other groups."

Altogether, the HPSI decreased in July by 3.9 points to 75.8. The HPSI is up 1.6 points compared to the same time last year.

"Overall, the HPSI remains within a tight range established a few months after the onset of the pandemic in 2020," Duncan said. "Consumer sentiment toward homebuying hit yet another survey low in July, continuing the sharp downward trend established in March. The percentage of respondents citing high home prices as the top reason for it being a 'bad time to buy' also reached an all-time high. On the flip side, selling sentiment remains extremely high, and well above pre-pandemic levels, for the same commonly cited reason: high home prices."

Read the full research report [2] at FannieMae.com for additional information.