Consumer housing sentiment edges up, affordability still a major issue

Fannie Mae reports on homebuying and selling outlook

Consumer housing sentiment edges up, affordability still a major issue

Fannie Mae’s latest Home Purchase Sentiment Index (HPSI) revealed a modest increase in consumer optimism about the housing market despite ongoing affordability concerns.

The June HPSI increased by 3.2 points to 72.6, rebounding from May’s dip and showing a 6.6-point rise compared to the same period last year.

While overall sentiment has improved, affordability remains the primary concern for most consumers. The percentage of respondents who believe it’s a good time to buy a home rose from May’s record low of 14% to 19% in June. However, this means that an overwhelming 81% still view current conditions as unfavorable for homebuying.

“Affordability concerns remain the primary driver of consumer housing sentiment, even as the topline findings from our monthly survey showed a modest uptick in optimism on both homebuying and home-selling conditions,” Mark Palim, Fannie Mae deputy chief economist, said in the report.

The survey also indicated that more consumers expect both home prices and mortgage rates to increase over the next 12 months. This expectation could further compound affordability concerns for potential buyers.

On the selling side, sentiment improved slightly, with 66% of respondents indicating it’s a good time to sell, up from 64% in May. This suggests a continued perception of a strong seller’s market, likely driven by limited housing supply.

Palim noted that any significant improvement in overall sentiment would likely require progress on affordability, either through lower mortgage rates or improved housing supply.

“If mortgage rates decline through the end of the year, as we currently forecast, we do think home sales activity will pick up, but progress on that front is likely to be slow due to the ongoing imbalance between supply and demand,” he said.

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“A significant majority of consumers continue to tell us that it’s a ‘bad time’ to buy a home, and they’re also telling us that they expect both home prices and mortgage rates to move higher over the next 12 months. Taken together, in our view, this leaves little upside to overall sentiment until meaningful progress is made on affordability – most likely in the form of either lower rates or improved supply. Of course, the flip side to a difficult purchase market is an advantageous sales market, and respondents also maintained their position that it’s a generally good time to sell, pointing to high home prices as the primary reason.”

The survey also revealed an increase in job security sentiment, with 79% of respondents expressing confidence in their job stability, up from 75% in May. While this could potentially support housing market activity, it may not be enough to overcome the broader affordability challenges.

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