Housing Sentiment Remains Stuck in Low-Level Plateau

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Dec 07, 2023, 08:30 ET

Only 14% of Consumers Believe It's a Good Time to Buy a Home, a New Survey Low

WASHINGTON, Dec. 7, 2023 /PRNewswire/ -- The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index^® (HPSI) decreased 0.6 points in November, remaining within the bounds of the low-level plateau it established in the first half of 2023. Consumers' perceptions of homebuying conditions remain overwhelmingly pessimistic, as only 14% of consumers believe it's a good time to buy a home, a new survey low. Pluralities of respondents also continue to expect both home prices and mortgage rates to increase over the next 12 months. Overall, the full index is up 7.0 points compared to last year.

"Over the past year, the HPSI has plateaued at a low level, evidence of persistent consumer pessimism regarding the state of the housing market," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. "Looking back, consumer belief that it's a 'bad time to buy a home' hit a survey high several times this year – including this month – and each time the pessimism could be attributed to high home prices and high mortgage rates. At the end of 2022, as mortgage rates approached 7%, a rate level not seen in over a decade, a plurality of consumers said they expected home prices to decrease; however, that optimism faded over the course of 2023. A significant majority of respondents have also continued to expect mortgage rates to increase or stay the same, though these expectations have tempered over the year. At the same time, consumers have expressed a reduced sense of financial security, with fewer respondents reporting household income growth over the year and a higher percentage saying their incomes remained the same."

Duncan continued: "The combination of persistent affordability challenges and less rosy household finances remain the primary drivers of the low-level plateauing of housing sentiment. Even if mortgage rates decline over the next year, which we currently expect, it's unlikely to meaningfully affect affordability. The lack of housing inventory is likely to remain a challenge for some time, and home purchase sentiment may continue to be suppressed as a result. As our forecast indicates, we believe it will be a couple years before homes sales return to more normal, pre-pandemic levels."

Home Purchase Sentiment Index – Component Highlights

Fannie Mae's Home Purchase Sentiment Index (HPSI) decreased in November by 0.6 points to 64.3. The HPSI is up 7.0 points compared to the same time last year. Read the full research report for additional information.

Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home decreased from 15% to 14%, while the percentage who say it is a bad time to buy remained unchanged at 85%. As a result, the net share of those who say it is a good time to buy decreased 1 percentage point month over month.
Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home decreased from 63% to 60%, while the percentage who say it's a bad time to sell increased from 37% to 40%. As a result, the net share of those who say it is a good time to sell decreased 5 percentage points month over month.
Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months increased from 40% to 41%, while the percentage who say home prices will go down increased from 23% to 24%. The share who think home prices will stay the same decreased from 36% to 35%. As a result, the net share of those who say home prices will go up in the next 12 months remained unchanged month over month.
Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 16% to 22%, while the percentage who expect mortgage rates to go up decreased from 47% to 44%. The share who think mortgage rates will stay the same decreased from 36% to 34%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased 8 percentage points month over month.
Job Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 78% to 76%, while the percentage who say they are concerned increased from 21% to 23%. As a result, the net share of those who say they are not concerned about losing their job decreased 4 percentage points month over month.
Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 20% to 19%, while the percentage who say their household income is significantly lower increased from 10% to 12%. The percentage who say their household income is about the same decreased from 69% to 68%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 3 percentage points month over month.

About Fannie Mae's Home Purchase Sentiment Index
The Home Purchase Sentiment Index^® (HPSI) distills information about consumers' home purchase sentiment from Fannie Mae's National Housing Survey^® (NHS) into a single number. The HPSI reflects consumers' current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers' evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

About Fannie Mae's National Housing Survey
The National Housing Survey (NHS) is a monthly attitudinal survey, launched in 2010, which polls the adult general population of the United States to assess their attitudes toward owning and renting a home, purchase and rental prices, household finances, and overall confidence in the economy. Each respondent is asked more than 100 questions, making the NHS one of the most detailed attitudinal longitudinal surveys of its kind, to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). For more information, please see the Technical Notes.

Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to support the housing market. The November 2023 National Housing Survey was conducted between November 1, 2023 and November 16, 2023. Most of the data collection occurred during the first two weeks of this period. The latest NHS was conducted exclusively through AmeriSpeak^®, NORC at the University of Chicago's probability-based panel, on behalf of PSB Insights and in coordination with Fannie Mae. Calculations are made using unrounded and weighted respondent level data to help ensure precision in NHS results from wave to wave. As a result, minor differences in calculated data (summarized results, net calculations, etc.) of up to 1 percentage point may occur due to rounding.

Detailed HPSI & NHS Findings
For detailed findings from the Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results.

To receive e-mail updates with other housing market research from Fannie Mae's Economic & Strategic Research Group, please click here.

About the ESR Group
Fannie Mae's Economic and Strategic Research Group, led by Chief Economist Doug Duncan, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets. The ESR Group was awarded the prestigious 2022 Lawrence R. Klein Award for Blue Chip Forecast Accuracy based on the accuracy of its macroeconomic forecasts published over the 4-year period from 2018 to 2021.

About Fannie Mae
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:

Fannie Mae Newsroom
https://www.fanniemae.com/news

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Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group or survey respondents included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group or survey respondents as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

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