Home Purchase Sentiment Improves

During the first month of 2021, consumers reported a significantly more positive view of home-selling conditions over the previous month — that component of the Fannie Mae Home Purchase Sentiment Index (HPSI) jumped 16 percentage points on net. The other five components remained relatively flat. Year over year, the HPSI is down 15.3 points.

According to the month's HPSI, the rise can be attributed to net increases in four components this month: selling conditions, change in household income, buying conditions, and job loss concern. Two components decreased: home price outlook and mortgage rate outlook.

Some more key indicators from the January report include:

• The net share of consumers who say it is a good time to buy rose 2 percentage points after falling for the past two months.
• The net share of consumers who say home prices will go up fell by 1 percentage point, continuing the decline seen last month.
• The net share of those who say mortgage rates will go down over the next 12 months fell 1 percentage point to -36%
• The net share of employed consumers who say they are not concerned about losing their job rose by 1 percentage point, ending the decline seen for the last three months.
• The net share of those who say their household income is significantly higher than it was 12 months ago rose by 5 percentage points in January, reversing last month’s decrease.
• The share of consumers who say they would buy a home if they were going to move rose 8 percentage points to 70%. The share who say they would rent fell 5 percentage points to 25%.

“The HPSI experienced a modest uptick in January, reversing much of December’s decline,” said Doug Duncan, Fannie Mae SVP and Chief Economist. “Interestingly, lower-income and renter groups were more optimistic this past month across nearly all of the sentiment index’s components. We will pay close attention to see if this newfound optimism develops into a trend, which could indicate either that some demographics who have been more negatively impacted by the pandemic may be starting to feel the economic recovery or that this is a response to the additional stimulus enacted in December.”

“Overall, the index’s monthly increase was driven largely by a substantial jump in the share of consumers reporting that it’s a good time to sell a home, with many citing favorable mortgage rates, high home prices, and low housing inventory as their primary rationale. Among owners and higher-income groups, however, the other five components of the index remained relatively flat or slightly negative, suggesting to us that some consumers are waiting to gauge the effectiveness of any new fiscal policies and vaccination distribution programs on both housing and the larger economy.”