Affordability Remains Chief Consumer Concern

The Home Purchase Sentiment Index (HPSI) published by Fannie Mae increased for its third straight month in January 2023, rising 0.6 points to an index of 61.6 points as three of the index’s six components increased month-over-month. 

Of the six questions asked to consumers, only 17% of survey respondents believe it’s a good time to buy, likely owing to the relatively high home prices and still-increasing nominal interest rates. 

Year-over-year, the index is down by 10.2 points.

“January’s HPSI results showed that consumer sentiment toward the housing market remains subdued by historical standards,” said Doug Duncan, Fannie Mae’s SVP and Chief Economist. “For consumers, the same affordability issues are persisting, as they continue to indicate that high home prices and high mortgage rates make it a ‘bad time to buy’ a home.” 

“The latest survey data also indicated that the majority of consumers expect home prices to decrease or remain flat over the next year, which may incentivize some potential homebuyers to delay their purchase decision,” Duncan continued. “Although ‘good time to sell’ sentiment ticked upward this month, it’s still much lower than it was a year ago, as purchase affordability remains seriously constrained and mortgage demand has receded. Until we see improvements in affordability via lower home prices and mortgage rates, we expect home sales to remain muted in the coming months.” 

As highlighted by Fannie Mae, the indexes components showed: 

  • Good/bad time to buy: The percentage of respondents who say it is a good time to buy a home decreased from 21% to 17%, while the percentage who say it is a bad time to buy increased from 76% to 82%. As a result, the net share of those who say it is a good time to buy decreased 9 percentage points month-over-month. 
  • Good/bad time to sell: The percentage of respondents who say it is a good time to sell a home increased from 51% to 59%, while the percentage who say it’s a bad time to sell decreased from 42% to 39%. As a result, the net share of those who say it is a good time to sell increased 11 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 30% to 32%, while the percentage who say home prices will go down remained unchanged at 37%. The share who think home prices will stay the same increased from 29% to 30%. As a result, the net share of those who say home prices will go up increased 2 percentage points month-over-month. 
  • Mortgage rate expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 14% to 13%, while the percentage who expect mortgage rates to go up increased from 51% to 52%. The share who think mortgage rates will stay the same remained increased from 31% to 33%. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased 2 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 remained unchanged at 82%, while the percentage who say they are concerned increased from 17% to 18%. As a result, the net share of those who say they are not concerned about losing their job remained unchanged month over month. Note: Net share number remained unchanged due to rounding. 
  • Household income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 25% to 22%, while the percentage who say their household income is significantly lower decreased from 15% to 10%. The percentage who say their household income is about the same increased from 59% to 67%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased 2 percentage points month-over-month. 

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