Fannie Mae’s Home Purchase Sentiment Index (HPSI) fell 2.4 points to 71.8 in January, its lowest level since May 2020, the GSE reported.
The full index is down 5.9 points year-over-year.
Affordability concerns drove sentiment down, with four of the index’s six components falling month-over-month. Only 25% of respondents said they believed it’s a good time to buy a home, an all-time low for the survey, while 69% said it’s a good time to sell.
“Consumer sentiment toward housing softened further in January – the HPSI fell 2.4 points to 71.8 – as affordability and supply constraints continue to limit home purchase opportunities, particularly among younger households,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.
Younger consumers in particular said they expect home prices to continue skyrocketing and reported more pessimism about the economy. They reported being optimistic about their future finances, but less optimistic about their current personal finances.
“All of this points back to the current lack of affordable housing stock, as younger generations appear to be feeling it particularly acutely and, absent an uptick in supply, may have their homeownership aspirations delayed. On the whole, the latest HPSI results are consistent with our forecast of slowing housing activity in the coming year,” Duncan said.
The net share of respondents who reported significantly higher income rose six percentage points month-over-month. But though wages are trending up, home price appreciation is outpacing them in most of the US.
“Historically low rates and rising wages are still big reasons why workers can meet or come very close to standard lending benchmarks in a majority of counties we analyze. But the portion of wages required for major ownership expenses nationwide is getting closer to levels where banks become less likely to offer home loans,” said ATTOM Chief Product Officer Todd Teta.
Respondents also said they feel more concerned about job stability and rising mortgage rates. The percentage the reported being unconcerned about losing their job in the next twelve months fell from 82% to 78%, and those who reported concern rose from 16% to 17%, resulting in a 5 percentage point net drop month-over-month.
The share of respondents who expect mortgage rates to go up rose from 56% to 58%. The net share of Americans who say mortgage rates will go down over the next year fell two percentage points.
Here are some highlights from the report:
- Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home fell from 26% to 25%, while the percentage who say it is a bad time to buy rose from 66% to 70%. The net share of those who say it is a good time to buy fell 5 percentage points.
- Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home fell from 76% to 69%, while the percentage who say it’s a bad time to sell rose from 17% to 22%. The net share of those who say it is a good time to sell fell 12 percentage points.
- Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months fell from 44% to 43%, while the percentage who say home prices will go down fell from 19% to 14%. The share who think home prices will stay the same rose from 30% to 35%. As a result, the net share of Americans who say home prices will go up rose 4 percentage points.