Consumers are continuing to shy away from home purchases, according to the October Fannie Mae Home Purchase Sentiment Index (HPSI), released today. The index fell 2 points in the month, to 85.7, a continuation of a downward trend since the spring.
Fannie Mae blames the fall on drop in five of the six components that measure consumer’s home buying and selling attitudes to comprise the index. The share of Americans who said it is a good time to buy a home fell 5 percentage points. Yet nearly a third (30 percent) of those that Fannie Mae surveyed said that it’s a good time to buy now due to favorable economic conditions. Additionally, sellers are less optimistic about their prospects – the measure of those who said it is a good time to sell dropped 3 percentage points.
Buyers and sellers also see some economic factors working against them. For buyers, the net share who expect mortgage rates to go down fell 1 percentage point. For sellers, the net share of survey respondents who expect home prices to go up fell 2 percentage points.
Also reflecting negatively on the HPSI was a more pessimistic view of job security. The net share of respondents who are confident about not losing their job falling by 1 percentage point from the previous month.
“After hitting a survey high during the spring home buying season, the HPSI has trended downward, declining in October to its lowest level in a year, said Doug Duncan, Fannie Mae's SVP, and Chief Economist. “While the October drop was broad-based – all but one of the six HPSI components declined – the net share of consumers who said it's a good time to buy a home posted the largest decrease, tying its second-lowest reading in the survey's history. The further erosion of buying sentiment occurred despite generally positive views of the economy.”
Duncan continued: “Among those who said it's a good time to buy, 30 percent – a record high – cited favorable economic conditions as the reason. Meanwhile, the share of consumers who think the economy is on the right track continued to grow, reaching a new survey high. The contrast between the survey's findings of weak home buying sentiment and overall economic optimism mirrors what we're seeing in the broader economy. While economic growth posted the fastest back-to-back pace in four years in the third quarter, residential investment declined for the third consecutive quarter, a first for the current expansion.”