Fannie Mae: Housing Sentiment Ticks Higher Despite Growing Affordability Concerns
(Illustration: Masood Aslami /pexels.com)
The Fannie Mae Home Purchase Sentiment Index increased 0.3 points in January to 73.4, bouncing back slightly after falling last month for the first time since July. Year over year, the HPSI is up 2.7 points.
“Improvements in consumer optimism toward both homebuying and home-selling conditions, along with even greater expectations that home prices will rise over the next 12 months, drove the increase,” Fannie Mae’s monthly report said. “However, after a surge in mortgage rate optimism in the second half of last year, January saw a 13-percentage-point decline in the net share of consumers who believe mortgage rates will go down in the next 12 months.”
The share of consumers who expect rental prices will go up increased 8 percentage points from last month to 65%, Fannie Mae said.
“Consumers seem increasingly pessimistic that housing affordability conditions will improve across the board, as a growing share expects home prices, rent prices and mortgage rates will all go up,” said Kim Betancourt, vice president of multifamily economics and strategic research with Fannie Mae. “The lower optimism toward the mortgage rate outlook was largely expected, as rates have continued to stay elevated and even crossed the 7% threshold in mid-January.”
Betancourt noted consumers have indicated a sharply growing expectation over the past two months that rent prices will increase. “This mirrors our expectation that multifamily rents will grow between 2.0% and 2.5% this year, up from an estimated 1.0% last year,” she said. “Even though it remains relatively cheaper for consumers to rent than buy in nearly every U.S. metro, we expect affordability issues will remain a real challenge for both renters and homeowners alike for the foreseeable future.”
Report highlights:
Good/Bad Time to Buy: The percentage of respondents who say this is a good time to buy a home (22%) and the percentage who say it is a bad time to buy (78%) both stayed steady from last month. The net share of those who say it is a good time to buy increased 2 percentage points month over month to -55%.
Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home (63%) and the percentage who say it’s a bad time to sell (36%) both remained unchanged month over month. The net share of those who consider this a good time to sell increased 1 percentage point month over month to 28%.
Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months increased from 38% to 43%, while the percentage who say home prices will go down decreased from 27% to 22%, Fannie Mae reported. The share who think home prices will stay the same decreased from 35% to 34%. As a result, the net share of those who say home prices will go up in the next 12 months increased 9 percentage points month over month to 20%.
Job Loss Concern: The percentage of employed respondents who say they are not concerned about losing their job in the next 12 months increased from 77% to 78%, while the percentage who say they are concerned stayed at 22%. As a result, the net share of those who say they are not concerned about losing their job increased 2 percentage points month over month to 56%.
