Survey shows homebuyer sentiment falling for the seventh month in a row as high home prices and mortgage rates weigh on affordability, according to Fannie Mae’s latest National Housing Survey.

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Homebuyer sentiment fell in September for the seventh month in a row to levels not seen since 2011, with three in four consumers polled by Fannie Mae saying high home prices and mortgage rates made it a bad time to buy.

Fannie Mae’s latest monthly National Housing Survey also found a growing number of homeowners and renters expect home prices to decline over the next 12 months, and that 59 percent think it’s a good time to sell.

Doug Duncan

“Consumers’ expectation that home prices will decrease matched a survey high, with a higher percentage of consumers believing home prices will decrease rather than increase over the next year – a shift in survey sentiment that had previously only happened in 2011 and at the start of the pandemic in 2020,” Fannie Mae Chief Economist Doug Duncan said, in a statement. “Moreover, 75 percent of consumers still think it’s a bad time to buy a home, with most citing high home prices and unfavorable economic and mortgage rate conditions as primary reasons.”

Source: Fannie Mae

Fannie Mae’s Home Purchase Sentiment Index (HPSI), which is based on six survey questions, decreased by 1.2 points in September, to 60.8, its lowest level since 2011. The index was flying high at on the eve of the pandemic, hitting 92.5 in February 2020 before plummeting to 63 in just two months.

After hitting a 2022 high of 75.3 in February, the index has declined every month, as rising mortgage rates erode would-be homebuyer’s buying power.

“As long as supply is limited and affordability pressures continue to constrain potential homebuyers via elevated home prices and mortgage rates, we expect home sales will remain sluggish,” Duncan said.

Four of the six components that make up the HPSI deteriorated in September, with respondents growing more pessimistic about buying conditions, the prospects for higher mortgage rates, the outlook for home prices and staying employed.

But the survey found Americans were more optimistic about selling conditions in September than August, and showed a slight uptick in households reporting income growth over the last 12 months.

In a Sept.21 forecast, Fannie Mae economists said they expect home sales to decline by 17.2 percent this year and by another 12.8 percent in 2023, even with home price appreciation expected to cool next year.

Source: Fannie Mae

At the national level, Fannie Mae forecasts annual home price appreciation will slow to 4.4 percent by the fourth quarter of 2023. But recent data shows national home prices peaked in June, and some markets where affordability is a challenge could see price declines.

More than one-third of homeowners and renters surveyed by Fannie Mae last month — 35 percent — said they think home prices will go down over the next 12 months, up from 33 percent in August. Home price pessimists now outnumber optimists, with the share of those who think home prices will go up over the next 12 months falling to 32 percent, down from 33 percent in August.

With 28 percent saying they expect home prices to stay the same, the net share of consumers who say home prices will go up decreased by 3 percentage points from August, to -3 percent — the lowest level since May 2020.

Source: Fannie Mae

Less than one in five consumers (19 percent) thought it was a good time to buy a home, down from 22 percent in August. With the percentage who said it’s a bad time to buy increasing from 73 percent to 75 percent, the net share of those who said it’s a good time to buy decreased by 5 percentage points.

Source: Fannie Mae

With the percentage of consumers who said it’s a bad time to sell decreasing to 33 percent and the percentage saying it’s a good time to sell unchanged at 59 perce, the net share of those who said it’s a good time to sell increased 2 percentage points month over month.

Source: Fannie Mae 

Nearly two-thirds of those surveyed (64 percent) said they expect mortgage rates will go up in the next 12 months, up from 61 percent in August. With only 9 percent expecting mortgage rates to fall during that time, the net share of those expecting mortgage rates will go down over the next 12 months decreased by 5 percentage points from August to September, falling to -55 percent.

Source: Fannie Mae

Although the percentage of consumers who said they’re concerned about losing their jobs in the next 12 months remained unchanged at 21 percent, the percentage of those who said they were not concerned dropped to 78 percent. The net share of those who said they were not concerned about losing their job decreased 1 percentage point, to 57 percent.

Source: Fannie Mae

While 11 percent of households reported a significant decline in income during the last 12 months, that’s down from 15 percent in August. With 26 percent reporting a significant increase in household income, the net share of those who said their household income was significantly higher than 12 months ago increased by 5 percentage points, to 15 percent.

Source: Fannie Mae

Consumers are growing a little less fearful that the economy is on the wrong track, although their views on the subject aren’t used to calculate the Home Purchase Sentiment Index.

Consumer pessimism about the economy seems to have peaked in June, when 81 percent said it was on the wrong track. Since then, the percentage of people who think the economy is on the right track has grown from 14 percent in June to 22 percent in September.

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Email Matt Carter

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