Two-Thirds of Americans Think It's A Good Time To Sell

Home Purchase Sentiment Index

The Fannie Mae (FNMA) Home Purchase Sentiment Index (HPSI) experienced a significant decline in May, dropping 2.5 points to 69.4. This decrease is driven primarily by a souring in consumer attitudes toward homebuying conditions, reaching an all-time survey low. Only 14% of consumers indicated that it’s a good time to buy a home, down from 20% last month. Additionally, the share of respondents who believe it’s a good time to sell fell from 67% to 64%.

Consumer Sentiment and Market Outlook

“Consumer sentiment toward housing declined from its recent plateau, as an increasing share of consumers struggle to find the positives in the current housing market,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. He noted that while there was initial optimism at the beginning of the year for declining mortgage rates, this has not materialized. “Current sentiment reflects pent-up frustration with the overall lack of purchase affordability,” Duncan added. The "good time to buy" component falling to a new survey low is a clear indicator of this frustration.

Despite this, homeowners’ perception of home-selling conditions remains relatively positive. Although there was a slight decline, it suggests that some homeowners may want or need to sell their homes for non-financial reasons. This could lead to an increase in listings in the near future. Duncan noted that improvements in housing inventory are expected to lead to a slight increase in sales activity through the end of the year.

Index Component Highlights

  • Good/Bad Time to Buy: Only 14% of respondents say it is a good time to buy a home, down from 20% last month. Conversely, those who believe it is a bad time to buy increased from 79% to 86%.

  • Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell decreased from 67% to 64%, while those who think it is a bad time to sell increased from 32% to 35%.

  • Home Price Expectations: The share of respondents who believe home prices will increase in the next 12 months remained at 42%, while those expecting a decrease stayed at 18%. The share expecting prices to remain the same rose from 39% to 40%.

  • Mortgage Rate Expectations: The percentage of respondents who believe mortgage rates will decrease in the next 12 months fell from 26% to 25%, while those expecting rates to rise decreased from 33% to 31%. The share expecting rates to remain the same increased from 40% to 42%.

  • Job Loss Concern: The percentage of respondents not concerned about losing their job in the next 12 months decreased from 76% to 75%, while those concerned increased from 23% to 24%.

  • Household Income: The percentage of respondents reporting significantly higher household income than a year ago increased from 17% to 20%. Those reporting unchanged income decreased from 70% to 67%, while those with lower income remained at 12%.

Analyzing the Trends

The decline in the HPSI reflects growing consumer frustration with housing affordability. Despite hopes for lower mortgage rates, the reality has been different, contributing to the sentiment that it’s a bad time to buy a home. The slight optimism in selling conditions suggests that some homeowners are ready to move, potentially increasing housing inventory.

Terry Loebs, founder of Pulsenomics, commented on the situation: "A slowdown in home price growth and easing mortgage rates offer a glimmer of hope that the peak of the housing affordability crisis may be behind us. However, the price surge of over 50% nationwide since early 2020 has created a high hurdle that will, unfortunately, keep many aspiring homeowners on a slower path to achieving their dream."

Wrapping Up

The latest data from the Fannie Mae Home Purchase Sentiment Index® highlights the ongoing challenges in the housing market, particularly around affordability and consumer sentiment. While there are signs of potential improvement in housing inventory, the significant increase in home prices since early 2020 remains a barrier for many aspiring homeowners.

(Source: fanniemae.com)

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