How did homebuying sentiment change in October?

Home purchase sentiment stayed flat in October as consumers remained divided about home buying and home selling conditions, as well as growing pessimism about the larger economy.

Fannie Mae’s home purchase sentiment index (HPSI) inched up one point to 75.5 last month, with four of its six components posting a month-over-month increase. But, annually, the index was down 6.2 points in October.

“The HPSI remained relatively flat this month, staying within the general bounds it began to set in June 2020 – following the initial shock of the pandemic to the index,” said Fannie Mae chief economist Doug Duncan. “While homebuying and home-selling sentiment remain at historically low and high levels, respectively, more consumers now expect that their personal financial situation will not improve over the next 12 months. This is particularly true among surveyed homeowners and older age groups.”

In October, 30% of consumers reported it’s a good time to buy a home, while 77% said it’s a good time to sell – up from 28% and 74% last month. In addition, consumers’ expectations that mortgage rates will increase over the next 12 months also grew stronger in October, up from 51% to 55% month over month.

According to Freddie Mac, the average 30-year fixed-rate mortgage declined for the first time in weeks to 3.09% for the week ending November 04. In its meeting last week, the Federal Reserve said it will not increase interest rates yet despite slowing the pace of its bond purchases.

Read next: How will the Fed tapering impact mortgage rates?

The net share of consumers who anticipate home prices will go up in the next 12 months rose four percentage points to 39% in October. Those who said they were not concerned about losing their job in the next 12 months also increased 4% to 84%. Meanwhile, the percentage of respondents who said their household income is significantly higher than a year ago dropped 3% to 23% month over month.

“Consumers also reported greater concern about the direction of the economy, with ‘right track’ sentiment reaching its lowest level since October 2013,” Duncan said. “We believe the uptick in negative economic sentiment is likely a function of ongoing supply chain disruptions and inflation concerns. However, while economic uncertainty could potentially dampen mortgage demand over the longer term, we believe current market conditions remain conducive to home purchase activity, as demand for homes continues to far outstrip the supply available for sale.”