Only 17% of consumers believe it’s a good time to purchase a home as rising interest rates and high home prices push many buyers out of the market, according to Fannie Mae’s Home Purchase Sentiment Index.
The May HPSI fell by 0.3 points, remaining relatively steady, but continues to move closer to its 10-year low of 63, recorded in April 2020. The full index is down 11.8 points YOY.
Affordability was the main concern of the consumers surveyed. The “Good Time to Buy” indicator dropped to a new low, with 79% of respondents saying it’s a bad time to buy a home. The majority of respondents also said they expect mortgage rates to continue rising in the next twelve months.
A greater share also worry they will lose their job in the next twelve months, though that number is only 16%, still very low.
“Consumers’ expectations that their personal financial situations will worsen over the next year reached an all-time high in the May survey, and they expressed greater concern about job security,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.
“Further, respondents’ pessimism regarding homebuying conditions carried forward into May, with the percentage of respondents reporting it’s a bad time to buy a home hitting a new survey high. The share reporting that it’s ‘easy to get a mortgage’ also decreased across almost all segments.”
The number of respondents who expect home prices to further increase in the next twelve months rose from 44% to 47%, while the percentage who say home prices will go down fell from 25% to 23%.
Consumers also said they expect mortgage rates not to change much in the next twelve months, perhaps noting that rates have paused their wild ascent to hover around 5.09% in the last few weeks.
The percentage of respondents who say mortgage rates fell from 5% to 4%, while the percentage who expect mortgage rates to rise dropped from 73% to 70%.
“These results suggest to us that increased mortgage rates, high home prices, and inflation will likely continue to squeeze would-be homebuyers – as well as those potential sellers with lower, locked-in mortgage rates – out of the market, supporting our forecast that home sales will slow meaningfully through the rest of this year and into next,” Duncan added.
More than half of current homeowners have a fixed rate below 4%, prompting fears that inventory levels will remain low due as potential sellers choose to stay in their current houses.