Homebuyer Optimism Increases

Home purchase sentiment is down on an annual basis and remains relatively flat month over month. The good-time-to-sell-rough-time-to-buy feeling remains strong among consumers, however the Fannie Mae Home Purchase Sentiment Index indicates some optimism from those considering buying in coming months. The experts at Fannie Mae say concerns about the coronavirus Delta variant, as well as inflation, could be negatively affecting consumer confidence.

Overall, three of the index’s six components increased month over month, while the other three decreased. Most notably, a greater share of consumers believes it’s a good time to buy a home—though that population remains firmly in the minority at only 32%—while the ongoing plurality of respondents who expect home prices to go up over the next 12 months declined to 40%, down from last month’s 46% but still well above the 24% of consumers who believe home prices will decline. Year over year, the complete index is down 1.8 points.

“The HPSI remained relatively flat this month, suggesting to us that the continued strength of demand for housing and favorable home-selling conditions may be offsetting broader concerns about the Delta variant and inflation that have negatively impacted other consumer confidence indices,” said Mark Palim, Fannie Mae VP and Deputy Chief Economist. “Most consumers continue to report that it’s a good time to sell a home—but a bad time to buy—and they most frequently cite high home prices and a lack of supply as their primary rationale. However, the ‘good time to buy’ component, while still near a survey low, did tick up for the first time since March, perhaps owing in part to the favorable mortgage rate environment and growing expectations that home price growth will begin to moderate over the next twelve months.”

The full research report is available on FannieMae.com. Below are some of the key findings from the report, which covers August.

• The percentage of respondents who say it is a good time to buy a home increased from 28% to 32%, while the percentage who say it is a bad time to buy decreased from 66% to 63%. As a result, the net share of those who say it is a good time to buy increased 7 percentage points month over month.
• The percentage of respondents who say it is a good time to sell a home decreased from 75% to 73%, while the percentage who say it’s a bad time to sell decreased from 20% to 19%. As a result, the net share of those who say it is a good time to sell decreased 1 percentage point month over month.
• The percentage of respondents who say home prices will go up in the next 12 months decreased from 46% to 40%, while the percentage who say home prices will go down increased from 21% to 24%. The share who think home prices will stay the same increased from 27% to 31%. As a result, the net share of Americans who say home prices will go up decreased 9 percentage points month over month.
• Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 5% to 6%, while the percentage who expect mortgage rates to go up decreased from 57% to 53%. The share who think mortgage rates will stay the same increased from 31% to 35%. As a result, the net share of Americans who say mortgage rates will go down over the next 12 months increased 5 percentage point month over month.
• The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 84% to 82%, while the percentage who say they are concerned increased from 13% to 15%. As a result, the net share of Americans who say they are not concerned about losing their job decreased 4 percentage points month over month.
• The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 27% to 26%, while the percentage who say their household income is significantly lower decreased from 14% to 12%. The percentage who say their household income is about the same increased from 56% to 59%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased 1 percentage point month over month.

According to the researchers at Fannie Mae, the HPSI distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making.

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