Consumer sentiment towards home buying fell in March, pushed down by rising interest rates and difficult conditions generally, according to Fannie Mae’s Home Purchase Sentiment Index.
The HPSI decreased by 2.1 points to 73.2, with four of its six components down month-over-month. The full index is down 8.5 points YOY.
In March, 69% of respondents said they expect mortgage rates to keep rising, a survey-high. At the same time, the “Good Time To Buy” component tanked to a survey low, with 73% saying it’s a bad time to buy.
“This month, we also saw a survey-high share of consumers expecting their financial situations to worsen over the next year; this was especially true among current homeowners,” said Mark Palim, Fannie Mae Vice President and Deputy Chief Economist.
“These concerns, together with the run-up in mortgage rates since the end of 2021, will likely diminish mortgage demand from move-up buyers – and fewer move-up buyers mean fewer available entry-level homes, adding to the rising-rate challenges for potential first-time homebuyers.”
Rising mortgage rates and home price appreciation are spurring consumer pessimism. Affordability is a major issue, and expected to get worse before it gets better.
“That said, affordability from a home price/down payment perspective is the worst it’s ever been, meaning extreme barriers to entry,” Bank of America economists Alexander Lin and Jeseo Park said in a recent report.
The percentage of respondents who say home prices will go up in the next 12 months rose from 46% to 48%, while the percentage who say home prices will go down rose from 16% to 20%. The share who think home prices will stay the same dropped from 32% to 28%.
Palim added that if consumer pessimism remains at these lows, the housing market is likely headed towards an even greater cooling than Fannie Mae’s current forecast.