HPSI Stays Flat, But Buyers Are Optimistic About The Future

As the housing market cools slightly and prices trend downward, consumers feel more positive about their homebuying prospects, according to Fannie Mae’s August Home Purchase Sentiment Index (HPSI).

The HPSI is a national telephone survey that polls 1,000 consumers a month about owning or renting a home, price changes, the economy, and overall consumer confidence. The results can help predict future housing outcomes.

The HPSI was essentially unchanged in August, falling 0.1 points to 75.7, but the survey revealed that buyers are starting to feel more optimistic about the housing market. For the first time since March, more respondents said they believe it’s a good time to buy a home, rising from 28% to 32%. The percentage of those who believe it’s a bad time to buy fell from 66% to 63%.

Buyers were optimistic about future homebuying conditions as well. Only 40% of respondents said they believe home prices will rise next year, a 6% decrease from last month.

“The HPSI remained relatively flat this month, suggesting to us that the continued strength of demand for housing and favorable home-selling conditions may be offsetting broader concerns about the Delta variant and inflation that have negatively impacted other consumer confidence indices,” Fannie Mae Vice President and Deputy Chief Economist Mark Palim said.

“Most consumers continue to report that it’s a good time to sell a home – but a bad time to buy – and they most frequently cite high home prices and a lack of supply as their primary rationale. However, the ‘good time to buy’ component, while still near a survey low, did tick up for the first time since March, perhaps owing in part to the favorable mortgage rate environment and growing expectations that home price growth will begin to moderate over the next twelve months.”

The housing market has cooled slightly in recent weeks as the number of homes for sale increased and prices fell. The HPSI may indicate that buyers see opportunity after a year of battling cash-rich investors and low inventory.

“For first-time buyers, more options and favorable financing offer the promise that after a year of frustrating bidding wars, finding the right home may finally be within reach,” said George Ratiu, manager of economic research at Realtor.com. 

“More listings are coming to the market these days, which is alleviating some of the supply crunch that prompted record increases in home prices.” 

This matches a Fortune magazine report from Home.LLC, a “startup that provides down payment assistance to homebuyers in return for a share of profits,” which predicts U.S. inventory—homes for sale—will rise by 11% later this year.

Here are some additional responses from the survey:

  • It’s a good time to sell a home: 73% (down from 75%)
  • It’s a bad time to sell a home: 19% (down from 20%)
  • Home prices will go up in the next 12 months: 40% (down from 46%)
  • Home prices will stay the same: 31% (up from 27%)
  • Mortgage rates will go down in the next 12 months: 6% (up from 5%)
  • Mortgage rates will go up: 53% (down from 57%)
  • Mortgage rates will stay the same: 35% (up from 31%)