Looking for a little clarity on this week’s news? Windermere Chief Economist Matthew Gardner digs into the numbers of the latest Home Purchase Sentiment Index. Consumer sentiment is good.

There’s an overwhelming amount of data and headlines circulating. This column is my attempt to make sense of it all for you, the real estate professional, from an overall economic standpoint.

Hot off the presses is the latest Home Purchase Sentiment Index (HPSI) for September, and it has a lot of great information that I wanted to share with you.

Now, I know that I have covered this report before, but that was a few months ago, and things have certainly changed. 

For those of you who might not be familiar with this report, the HPSI is a monthly survey that looks at how consumers view the current economy and how it might impact their housing decisions. It also gives some great insights as to how consumers feel about the future too.

Let’s get to the numbers.

As you can see here, the overall index fell off a cliff in March — not a surprise at all as that was when the pandemic hit — but the recovery has been very impressive. Can you see the V?

There are several reasons the index has not bounced back fully as the data shows three of the index’s components rising, but three falling. Let’s go through them one at a time.

As I said, three of the components rose in September with consumers reporting a substantially more optimistic view of homeselling conditions, and as you can see here, the percentage of respondents who said that it is a good time to sell increased from 48 percent to 56 percent, while the percentage who said that it is a bad time to sell dropped from 44 percent to 38 percent.

And as a result, the net share of those who said that it’s a good time to sell rose by 14 percentage points, and it has been on the rise since April.

As all of you are likely seeing in your markets, there are far more buyers than sellers, and when you combine this with very favorable mortgage rates, it’s not at all surprising to see that sellers are feeling pretty good about themselves right now.

And when we look at home price expectations, the percentage who said who they expect home prices to go up in the next 12 months rose from 33 percent to 41 percent, while the percentage who expected home prices to go down dropped from 26 percent to just 17 percent. Interestingly, the share who think home prices will stay the same was unchanged at 34 percent. 

As a result, the net share who expected home prices to rise increased by a solid 17 percentage points.

And you can see in the chart, there were considerable concerns over home prices early in the spring, as the pandemic hit, but those have practically disappeared. Personally speaking, I fear that anyone still hoping for prices to drop will be sorely disappointed.

The third component of the index that rose in September looked at the job market. As far as employment is concerned, the percentage who said that they are not worried about losing their job in the next 12 months rose from 78 percent to an impressive 83 percent, while the percentage who said that they are concerned decreased from 22 percent to 16 percent. 

As a result, the net share who said that they are not concerned about losing their job rose by a significant 11 percentage points.

And this makes sense. The job market is certainly not near getting back to where it was back in February. Still, it is improving, and more importantly, it tells me that a majority of homeowners didn’t lose their jobs during the pandemic, and they are feeling pretty comfortable right now.

But there were also some negatives, with the last three questions evoking more pessimistic responses. 

Firstly, when asked if it was a good time or a bad time to buy, the percentage who said it is a good time to buy a home dropped from 59 percent to 54 percent, while the percentage who said it is a bad time to buy increased from 35 percent to 38 percent. As a result, the net share who say it is a good time to buy dropped by 8 percentage points.

And I put this down to two things. Firstly, prices continue to increase, which is now hitting affordability, and it might well be discouraging some buyers. And secondly, concerns over mortgage rates.

When asked about their thoughts on the current mortgage environment, the percentage who said mortgage rates will go down in the next 12 months decreased this month from 17 percent to 11 percent. The percentage who expect mortgage rates to go up increased from 33 percent to 38 percent, and the share who think mortgage rates will stay the same decreased from 45 percent to 44 percent. 

As a result, the net share who expected mortgage rates to go down over the next 12 months decreased by 11 percentage points.

And this is reasonable. Rates are, in my opinion, close to the lows that we will see. Others believe that too.

Finally, when we look at income prospects, the percentage who said their household income is significantly higher now than 12 months ago decreased by one point to 24 percent. In contrast, the percent who said their household income is significantly lower rose by a point to 17 percent, and the percent who said their household income is about the same remained unchanged at 59 percent.

As a result, the net share of those who said that their household income is significantly higher than 12 months ago dropped by 2 percentage points.

Again, not too surprising given the current economic environment. That said, I expect to see it improve, but only when we see a vaccine for COVID-19, and there is more certainty about the direction the economy is taking.

The HPSI has recovered more than half of the early pandemic-period drop, which mirrors the vigorous homebuying activity that we have seen over the past few months.

Price expectations were up significantly in September. I believe that high sale prices are playing an increasingly important role in driving both the increase in “good time to sell” sentiment and the drop in “good time to buy” sentiment.

In the future, the wild card will be whether enough sellers enter the market to meet the strong homebuying demand that is in place.

There you have it. Consumers are generally feeling pretty good, and the numbers support my theory that housing is also in a pretty good place. However, there are headwinds given concerns about affordability and mortgage rates.

To get the big picture including all of the data, watch the full video above.

Matthew Gardner is the chief economist for Windermere Real Estate, the second largest regional real estate company in the nation.

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