Consumer sentiment regarding the housing market remains low, according to the latest Home Purchase Sentiment Index (HPSI) published by Fannie Mae (OTCQB: FNMA).
For November, the HPSI dropped by 0.6 points from the previous month to 64.3, keeping it within the bounds of the low-level plateau it established in the first half of 2023. The full index is up 7 points compared to last year. Among the more pessimistic aspects of the HPSI data was the low share of respondents who said it was a good time to buy a home (14%, down from 15%), who said it was a good time to sell a home (60%, down from 63%), and who believed home prices will rise in the next 12 months (41%, up from 40%).
A rare bit of optimism involved predictions on mortgage rates going down in the next 12 months: 44%, down from 47%.
“Over the past year, the HPSI has plateaued at a low level, evidence of persistent consumer pessimism regarding the state of the housing market,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist. “Looking back, consumer belief that it’s a ‘bad time to buy a home’ hit a survey high several times this year – including this month – and each time the pessimism could be attributed to high home prices and high mortgage rates. At the end of 2022, as mortgage rates approached 7%, a rate level not seen in over a decade, a plurality of consumers said they expected home prices to decrease; however, that optimism faded over the course of 2023.”
“At the same time,” Duncan added, “consumers have expressed a reduced sense of financial security, with fewer respondents reporting household income growth over the year and a higher percentage saying their incomes remained the same. The combination of persistent affordability challenges and less rosy household finances remain the primary drivers of the low-level plateauing of housing sentiment. Even if mortgage rates decline over the next year, which we currently expect, it’s unlikely to meaningfully affect affordability. The lack of housing inventory is likely to remain a challenge for some time, and home purchase sentiment may continue to be suppressed as a result. As our forecast indicates, we believe it will be a couple years before homes sales return to more normal, pre-pandemic levels.”
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