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Homebuyer Optimism Up, Yet Sits Historically Low

Optimism about purchasing a home rose for the first time in nine months, according to the latest Fannie Mae Home Purchase Sentiment Index (HPSI), yet buyer outlook remains relatively grim, and homeowners who locked-in lower mortgage rates might not be keen to sell.

With the month-over-month 0.6 point increase in November, to 57.3, sentiment remains just above an all-time low set on last month’s index and is significantly lower than its level at this time last year. Year-over-year, the full index is down 17.4 points.

Elevated mortgage rates continue to constrain affordability, analysts say, and 62% of respondents expect mortgage rates to continue rising over the next year, compared to only 10% who expect rates to decline.

Fannie Mae SVP and Chief Economist Doug Duncan says his team is "unsurprised" that both consumer homebuying and home-selling sentiment are significantly lower than they were last year, considering mortgage rates have more than doubled and home prices remain elevated.

"Following eight months of consecutive declines, the HPSI did tick up slightly in November but is essentially unchanged since hitting its all-time low last month,” he explained. Consumers' expectations about mortgage rates, Duncan says, "will contribute to a further slowing of home sales in the coming months, as both homebuyers and home-sellers have reason for apprehension."

Duncan says he expects mortgage demand to “continue to be curtailed by affordability constraints, while homeowners with significantly lower-than-current mortgage rates may be discouraged from listing their property and potentially taking on a new, much higher mortgage rate."

The HPSI survey measures six components:

  • Good/Bad Time to Buy
  • Good/Bad Time to Sell
  • Home Price Expectations
  • Mortgage Rate Expectations
  • Job Loss Concern, and
  • Household Income

Four of the index's six components increased modestly month-over-month, including those associated with homebuying and home-selling conditions; however, both remain well below year-ago levels, having declined on net 28 and 38 points, respectively.

As for job and income concerns, the net share of those who say they are not concerned about losing their job decreased 13 percentage points month over month.

The percentage of respondents who say their household income is significantly higher than it was a year ago is unchanged month-over-month.

The HPSI reflects consumers' current views and forward-looking expectations of housing market conditions and is used along with existing data to inform housing-related analysis and decision making, according to Fannie Mae.

Click here for more information on Freddie Mac's latest HPSI.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media/Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning news, among others. Contact Christina at [email protected]
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