Pessimism persists due to affordability and supply issues
For the second straight month, consumers reported a more pessimistic view of homebuying conditions in May, according to Fannie Mae’s Home Purchase Sentiment Index (HPSI).
Although the index inched up by one point to 80 month over month, the share of consumers who believe it is a good time to buy a home fell from 54% in April to just 35% in May. The uptick in the overall sentiment, Fannie Mae chief economist Doug Duncan (pictured) said, was spurred by improvements in components related to personal finance, “with consumers feeling substantially more positive about their jobs and income.”
The net share of consumers who said they are not concerned about losing their job in the next 12 months grew 11 percentage points to 87%. Meanwhile, those who said their household income is significantly higher than it was 12 months ago increased 12 percentage points to 29% in May.
“The ‘good time to buy’ component fell further – hitting another all-time survey low – as consumers appear to be acutely aware of higher home prices and the low supply of homes, the two reasons cited most frequently for that particular sentiment,” Duncan said.
However, despite the challenging housing market conditions, Duncan said that homebuyers are more determined than ever.
“Consumers do appear more intent to purchase on their next move, a preference that may be supported by the expectation of continued low mortgage rates, as well as the elevated savings rate during the pandemic, which may have allowed many to afford a down payment,” he said.
The number of respondents who anticipate mortgage rates to go down in the next 12 months increased from 2% to 6%, while home price expectations dropped from 45% to 47% in May. The net share of consumers who said it is a good time to sell a home rose 1% month over month to 67%.