Fannie Mae Home Purchase Sentiment Index Remains Near Survey Low

The Fannie Mae Home Purchase Sentiment Index increased by 4.5 points in May to 67.5, building slightly after nearing its record low in April. The survey indicated home buyers are much more confident in the current market than sellers.

Four of the six HPSI components increased month over month, with consumers reporting a somewhat more optimistic view of homebuying conditions and, to a lesser extent, home-selling conditions. Moreover, fewer consumers reported expectations that mortgage rates will go up over the next 12 months. Year over year, the HPSI fell bt 24.5 points.

“Although the HPSI’s precipitous declines of March and April did not continue in May, Americans’ financial, economic and housing market concerns remain substantially elevated compared to survey history,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Low mortgage rates have helped cushion some of the impact of the pandemic on consumer sentiment regarding whether it’s a good time to buy a home, which picked back up this month to late-2018 levels.

Duncan noted although weakened income perceptions and continuing job loss concerns, particularly among renters, are likely weighing on many would-be buyers, purchase mortgage applications have returned to mid-March levels when pandemic response measures began ramping up. “Home-selling sentiment remains severely dampened due primarily to economic concerns, though increased purchase activity may improve the confidence of some potential sellers,” he said. “As lockdown restrictions begin to ease across the country, we expect economic recovery to be largely shaped by consumers’ decisions regarding when and how to reengage in the economy.”

Other survey findings:

–Good/Bad Time to Buy: The percentage of Americans who say it is a good time to buy a home increased from 48% to 52%, while the percentage who say it is a bad time to buy decreased from 46% to 39%. As a result, the net share of Americans who say it is a good time to buy increased 11 percentage points.

–Good/Bad Time to Sell: The percentage of Americans who say it is a good time to sell a home increased from 29% to 32%, while the percentage who say it’s a bad time to sell decreased from 65% to 62%, resulting in a net share of those who say it is a good time to sell increasing by6 percentage points.

–Home Price Expectations: The percentage of Americans who say home prices will go up in the next 12 months increased this month from 23% to 26%, while the percentage who said home prices will go down increased from 34% to 35%. The share who think home prices will stay the same decreased from 36% to 30%, for a net gain of 2 percentage points.

–Mortgage Rate Expectations: The percentage of Americans who say mortgage rates will go down in the next 12 months increased this month from 23% to 25%, while the percentage who expect mortgage rates to go up decreased from 33% to 25%. The share who think mortgage rates will stay the same increased from 35% to 43%, for a net gain of 10 percentage points.

–Job Concerns: The percentage of Americans who say they are not concerned about losing their job in the next 12 months decreased from 76% to 75%, while the percentage who say they are concerned increased from 23% to 24%, for a net loss of 2 percentage points.

–Household Income: The percentage of Americans who say their household income is significantly higher than it was 12 months ago decreased from 20% to 18%, while the percentage who say their household income is significantly lower decreased from 21% to 19%. The percentage who say their household income is about the same increased from 58% to 61; overall, the index remained unchanged.