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Consumers Continue to Express Pessimism About Homebuying Conditions

The Fannie Mae [1] Home Purchase Sentiment Index [2] (HPSI) decreased 0.8 points in August to 62.0, the sixth consecutive monthly decline of the index, according to their latest report. Surveyed consumers continue to express pessimism about homebuying conditions, especially in the home-selling segment of the housing market. 

Despite the minute change in the index, four of the six major components which make up the HPSI experienced significant volatility resulting in the HPSI dropping 13.7 points year-over-year. 

On a monthly basis, consumers indicated via the survey that home-selling conditions have worsened over the last month dropping from 67% to 59% of respondents who believe now is a good time to sell. 

According to Fannie Mae, consumers also reported that homebuying conditions have improved since last month increasing from 17% to 22%, but on the future of home prices, consumers report mixed sentiments with the majority of consumers believing that mortgage rates will go up over the next year. 

“The share of consumers expecting home prices to go down over the next year increased substantially in August. Accompanying this, HPSI respondents reported a significant decrease in home-selling sentiment,” said Doug Duncan [3], Fannie Mae’s SVP and Chief Economist. “We also observed a large decline in consumers reporting high home prices as the primary reason for it being a good time to sell a home, suggesting that expectations of slowing or declining home prices have begun to negatively affect selling sentiment.” 

“Conversely, lower home prices would obviously be welcome news for potential first-time homebuyers, who are likely feeling the combined affordability constraints of the high home price and high mortgage rate environment. In fact, the survey’s ‘ease of getting a mortgage’ component dropped to an all-time low among this typically younger demographic (i.e., 18- to 34-year-olds).” 

“With home prices expected to moderate over the forecast horizon and economic uncertainty heightened, both homebuyers and home-sellers may be incentivized to remain on the sidelines—homebuyers anticipating home price declines and potential home-sellers not keen to give up their lower, fixed mortgage rate—contributing to a further cooling in home sales through the end of the year,” Duncan concluded. 

Additional findings on the six major components of the HPSI include: