A plurality of potential homebuyers believes that it still isn’t the right time to pull the trigger on homebuying, according to Fannie Mae’s latest Home Purchase Sentiment Index (HPSI). The data highlights a number of troublesome trends, the most eyebrow-raising of which is that respondents’ perception of home-buying conditions continues to linger near its all-time lowest number during the pandemic.
The latest result from the HPSI shows that many potential homebuyers are still lying in wait due to price concerns, but also tracked some early signs of increasing optimism.
“Notably, housing sentiment among renters, a common source of first-time homebuyers, has improved at approximately the same pace as homeowner(s),” said Mark Palim, Fannie Mae senior vice president and chief economist. “Over the last three months, the share of renters believing it’s a good time to buy a home has risen from 13% to 20%, while the share expecting mortgage rates to fall has risen from 16% to 30%. While these numbers are still relatively low, we think the improvement may signal that some potential homebuyers who have been waiting for mortgage rates to come down may be closer to coming off the sidelines, despite their ongoing concerns about home prices.”
Though the figures cited show that things may be headed in a more buyer-positive direction, the overall arc of the data suggests that pessimism is still a major factor in the housing market. Against a backdrop of 42% of September respondents who expected mortgage rates to decline, up from 39% in August, is the sentiment that home prices are a barrier to the home-buying process for many.
According to Palim, “Although most consumers continue to think it’s a ‘bad time’ to buy a home, the recent shift in attitude toward mortgage rates is pushing overall housing sentiment higher, and a growing share are now pointing to high home prices rather than high mortgage rates as the primary sticking point for affordability.”
This appears to show that price points continue to be a barrier for many in a population that is feeling more financial strain.
And according to the data, plenty of consumers aren’t quite on the same page as economists, who anticipate rates to continue falling. A zoomed out snapshot of the HPSI’s September data shows that 58% of respondents take a less optimistic view of mortgage rates, broken out as 31% of respondents who expect mortgage rates to stand pat and 27% who expect rates to increase.
What does this all mean for the market as a whole? An increase in home-buying activity may be on the horizon, but if the HPSI is any indicator, that activity will be tempered due to prices.
“Increased positivity that mortgage rates will continue to fall has driven the HPSI to a 30-month high, but we’ve yet to see consumers’ newfound rate optimism translate into a meaningful increase in home sales activity. Instead, as we noted in our latest housing forecast, existing-home sales are on pace to record their lowest annual total since 1995. This signals to us that consumers are paying attention to the easing interest rate environment but still feel stymied by the considerable run-up in home prices over the last four years,” said Palim.
Expressed as an index, the HPSI is on the rise, up 1.8 points in September to 73.9 overall.
