In the latest report from Fannie Mae, the Home Purchase Sentiment Index (HPSI) took a dip for the first time in four months, declining by 0.9 points to 71.9 in March. This decline, attributed primarily to increased pessimism about future mortgage rates, has raised questions about the timing for potential homebuyers.
The survey revealed that 34% of consumers now anticipate rates to rise in the next year, up from 32% last month. Despite this growing concern, both homebuying and home-selling sentiment saw slight improvements in March. However, the overarching belief that it is a "good time to buy" remains dampened by affordability concerns, with only 21% of consumers expressing agreement with this sentiment.
Doug Duncan, Fannie Mae’s senior vice president and chief economist, shed light on the findings, stating, “The HPSI remained relatively flat in March, but we’re seeing signs that consumers may be adjusting their expectations for the housing market to better accommodate the higher mortgage rate and home price environment.”
Duncan further explained, “With the historically low rates of the pandemic era now firmly behind us, some households appear to be moving past the hurdle of last year’s sharp jump in rates, an adjustment that we think could help further thaw the housing market.”
Despite the recent decline, the HPSI has shown significant growth year-over-year, climbing 10.6 points.
Looking ahead, Duncan forecasted a gradual increase in home listings and sales transactions, driven not only by rate-related adjustments but also by households needing to move for various life reasons.
Here's a detailed breakdown of the HPSI components in March:
The share of respondents who believe it’s a good time to buy a home increased slightly from 19% to 21%, while those who think it a bad time to buy dropped from 81% to 79%.
Sentiments about selling conditions also improved modestly, with 66% saying it’s a good time to sell (up from 65%), and the percentage of those who disagree decreased from 35% to 34%.
Expectations for home prices showed a mixed view, leading to a slight overall optimism gain. The net share of those who say home prices will go up in the next 12 months increased 1% over the month.
Mortgage rate outlook worsened, with more consumers expecting rates to rise rather than fall over the next year. The net share of those who say mortgage rates will go down over the next 12 months decreased 8% month over month.
Concerns about job security saw a slight uptick, reflecting growing economic uncertainties. The net share of those who say they are not concerned about losing their job decreased 2% month over month.
Household income perceptions remained mostly stable, with slight variations in those reporting higher or lower incomes compared to the previous year. The net share of those who say their household income is significantly higher than 12 months ago decreased 2% in March.
With evolving sentiments and economic indicators, potential homebuyers and sellers are urged to stay informed and consider their options carefully in the current real estate landscape.