Consumers Express Increasing Housing Market Frustrations

The Fannie Mae Home Purchase Sentiment Index (HPSI) remained largely flat in October as consumer frustration toward housing unaffordability and an economy battling inflation continued to depress overall sentiment.

Despite improvement in the share of consumers expressing greater job security and improved household income, an astounding 78% of respondents believe the economy is on the “wrong track,” up 7 percentage points from last month, with the vast majority once again pointing to inflation as the top reason for that belief.

This month, a survey-record 85% of consumers indicated that it’s a “bad time” to buy a home, with most respondents citing high home prices and high mortgage rates as the primary reasons. By comparison, only 37% believe it’s a “bad time” to sell a home. Overall, the full index is up 8.2 points from its all-time low last year.

“Consumers expressed even greater pessimism toward the larger economy this month, in addition to their ongoing frustration with the housing market,” said Doug Duncan, Fannie Mae Senior VP and Chief Economist. “Via our October National Housing Survey, 78% of respondents told us the economy is on the ‘wrong track'—up from 71% last month—and they overwhelmingly cited inflation as the primary reason why. Across all income groups, inflation has consistently driven the ‘wrong track’ belief since the end of last year, suggesting consumers are fed up with the high prices of many goods and services. Although the labor market is strong and wages have risen in the past year, consumers may believe that their purchasing power has not kept up with prices, as 69% of consumers say their incomes are ‘about the same’ compared to the previous year. We expect this tightness in household finances, along with high home prices and elevated mortgage rates, to prolong the affordability challenges facing many would-be homebuyers.”

Home Purchase Sentiment Index: Component Highlights for October

• Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home decreased from 16% to 15%, while the percentage who say it is a bad time to buy increased from 84% to 85%. As a result, the net share of those who say it is a good time to buy decreased by 2 percentage points month-over-month.
• Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home remained unchanged at 63%, while the percentage who say it’s a bad time to sell remained unchanged at 37%. As a result, the net share of those who say it is a good time to sell remained unchanged month-over-month.
• Home Price Expectations: The percentage of respondents who said home prices would go up in the next 12 months decreased from 42% to 40%, while the percentage who said home prices would go down remained unchanged at 23%. The share of people whose home prices will stay the same increased from 35% to 36%. As a result, the net share of those who say home prices will go up in the next 12 months decreased by 2 percentage points month-over-month.
• Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 17% to 16%, while the percentage who expect mortgage rates to go up increased from 46% to 47%. The share of people who think mortgage rates will stay the same decreased from 37% to 36%. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased 1 percentage point month-over-month.
• Job Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 75% to 78%, while the percentage who say they are concerned decreased from 23% to 21%. As a result, the net share of those who say they are not concerned about losing their job increased by 5 percentage points month-over-month.
• Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago increased from 18% to 20%, while the percentage of respondents who say their household income is significantly lower decreased from 13% to 10%. The percentage of people who say their household income is about the same increased from 68% to 69%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased by 5 percentage points month-over-month.

Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased in October by 0.4 points to 64.9. The HPSI is up 8.2 points compared to the same time last year.

To read the full report, including more data, charts, and methodology, click here.