Posted: February 1st, 2024
As the housing market continues to pose challenges for potential homeowners, a recent survey by Fannie Mae reveals a growing sense of pessimism among consumers. According to the Home Purchase Sentiment Index (HPSI), mortgage rates have now surpassed home prices as the primary obstacle to achieving homeownership.
In September, the HPSI declined by 2.4 points, reaching a reading of 64.5. This decline was driven by a decrease in the component measuring perceived homebuying conditions, with only 16% of respondents considering it a good time to purchase a home. This marks a drop from 18% in August and matches the lowest level recorded last year.
The percentage of consumers who believe it is a bad time to buy increased from 82% to 84%, reaching a new survey high. Consequently, the net share of those expressing optimism about buying declined by 4 percentage points compared to the previous month. Furthermore, for the first time in the survey's history, high mortgage rates have overtaken high home prices as the top reason for many respondents believing it is a bad time to buy a house.
The persistence of mortgage rates above 7% seems to be exacerbating the negative sentiment among consumers regarding the housing market. Unfortunately, there is little indication of relief in sight for buyers, as many also anticipate further increases in home prices over the next year. The net share of respondents expecting home prices to rise in the next 12 months increased by 4 percentage points from August to September.
Additionally, there is pessimism surrounding mortgage rates, with the net share of those anticipating a decrease in rates falling by 1 percentage point month over month. Home sellers are also becoming less optimistic, with 63% of respondents considering it a good time to sell, a decline from 66% in August. Conversely, the percentage of those who believe it is a bad time to sell grew from 34% to 37%.
This decrease in sentiment resulted in a 7 percentage point decline in the net share of those viewing it as a good time to sell. According to Doug Duncan, Fannie Mae's Chief Economist, the survey suggests that many homeowners are reluctant to let go of their current lower mortgage rates, leading to concerns about limited qualified buyers and potentially impacting sale values.
Additionally, respondents expressed signs of economic strain, including lower household incomes and a reduced sense of job security. All of these factors indicate that affordability will remain a pressing issue in the housing market, potentially prolonging sluggish home sales into the next year.
As a mortgage broker, it is essential to understand these challenges and guide clients through them. Despite the hurdles, there are still opportunities to navigate the market and secure suitable financing options. Whether you are considering buying or selling a home, I’m here to provide expertise and support in achieving your real estate goals. Get in touch with me today to take the first step towards homeownership.