Homebuyer sentiment increase by 3.7 points to 61, only slightly above its all-time low set in October, according to Fannie Mae’s Home Purchase Sentiment Index® (HPSI) for December.
Three of the index’s six components improved month over month, including those associated with homebuying conditions, mortgage rate outlook, and job security. Additionally, the full index is down 13.2 points year over year.
Key highlights:
- 21% of respondents said it is a good time to buy a home, up from 16% last month, and the net share of this sentiment increased 8 percentage points MoM. Meanwhile, 76% of respondents said it’s a bad time, down from 79% last month.
- Respondents who say it is a good time to sell a home decreased from 54% to 51%, and the net share of this sentiment decreased 6 percentage points. Meanwhile, the percentage who say it’s a bad time increased from 39% to 42%.
- 30% of respondents say home prices will go up in the next 12 months, unchanged from last month, and the net share of this sentiment decreased 3 percentage points. Meanwhile, 37% say home prices will go down, up from 34% last month.
- Respondents who say mortgage rates will go down in the next 12 months increased from 10% to 14%, and the net share of this sentiment increased by 15 percentage points. Meanwhile, respondents who expect rates to go up decreased from 62% to 51%. Those who think mortgage rates will stay the same remained increased from 24% to 31%.
- 82% of respondents say they are not concerned about losing their job in the next 12 months, up from 78% last month, and the net share of this sentiment increased 8 percentage points. Meanwhile, 17% say they are concerned, down from 21% last month.
- Respondents who say their household income is significantly higher than it was 12 months ago decreased from 27% to 25%, and the net share of this sentiment was unchanged. Meanwhile, respondents who say their income is significantly lower decreased from 17% to 15%. Those who say their household income is about the same increased from 55% to 59%.
Major takeaway:
“In December, the HPSI inched upward slightly, as consumers reported increased expectations that mortgage rates and home prices may decrease over the next year – perhaps reflecting recently observed declines in mortgage rates and average home prices,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “However, the HPSI remains very low by historical standards, particularly the ‘good time to buy’ component, and respondents continue to cite high home prices and unfavorable mortgage rates as the primary reasons for their pessimism. As we enter 2023, we expect affordability to remain the top challenge for potential homebuyers, as even small declines in rates and home prices – from the perspective of the buyer – may not produce sufficient purchasing power. At the same time, existing homeowners may continue to wait to list their properties, since many have already locked in lower mortgage rates, creating minimal incentive to sell and buy again until rates are more favorable. We think the resulting tension will contribute to a continued decline in home sales in the coming months.”
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