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Consumers have never been more pessimistic about conditions for homebuyers in monthly polls Fannie Mae has been conducting since 2010, but an index aimed at capturing a broader view of their housing-related attitudes, intentions, and perceptions actually improved last month.
Fannie Mae’s latest National Housing Survey, which polled 1,039 consumers between Oct. 1 and Oct. 19, found a survey-record 85 percent of Americans said last month was a bad time to buy a home, with most respondents citing high home prices and high mortgage rates as the primary reasons.
When the survey was conducted, mortgage rates were on their way to the highest levels in more than 20 years, with rates on 30-year fixed-rate loans hitting a 2023 peak of 7.83 percent on Oct. 25, according to rate lock data tracked by Optimal Blue.
Mortgage rates have since retreated after Federal Reserve policymakers sounded less hawkish and refrained from raising rates on Nov. 1, and a jobs report released Friday showed unemployment creeping up toward 4 percent, threatening to trigger a recession warning.
But mortgage rates weren’t the only thing troubling consumers, Fannie Mae Chief Economist Doug Duncan noted, with 78 percent of those polled saying the economy was on the wrong track in October, up from 71 percent a month ago.
“Across all income groups, inflation has consistently driven the ‘wrong track’ belief since the end of last year, suggesting consumers are fed up with the high prices of many goods and services,” Duncan said in a statement Tuesday. “Although the labor market is strong and wages have risen in the past year, consumers may believe that their purchasing power has not kept up with prices, as 69 percent of consumers say their incomes are ‘about the same’ compared to the previous year. We expect this tightness in household finances, along with high home prices and elevated mortgage rates, to prolong the affordability challenges facing many would-be homebuyers.”
Fannie Mae pulls six of the most important questions from the monthly National Housing Survey and distills them into a single number, the Fannie Mae Home Purchase Sentiment Index (HPSI).
With two of the index’s six components increasing from September to October, the HPSI rose 0.4 points to 64.9, bringing the index up 8.2 points from an all-time low of 56.7 registered in October 2022.
The two components of the HPSI that improved from September to October showed more Americans felt secure in their jobs, and also reflected an improvement in the share of households who said their income was “significantly higher” than a year ago.
While three components of the HPSI declined from September to October — buyer sentiment, home price outlook, and mortgage rate outlook — consumers said conditions for sellers were unchanged.
The percentage of consumers who said it was a bad time to buy increased from 84 percent in September to 85 percent in October, a new survey high. With the percentage who said it was a good time to buy decreasing to 15 percent, the net share of those who said October was a good time to buy decreased by 2 percentage points from September.
With listings scarce in many markets, 63 percent of those surveyed said October was a good time to be selling a home, unchanged from September. The percentage who said it was a bad time to sell remained unchanged at 37 percent, leaving the net share of those who say it is a good time to sell unchanged from September.
Data releases show home price appreciation cooling in many markets, and only 40 percent of those surveyed by Fannie Mae in October expect home prices will go up in the next 12 months, down from 42 percent in September. Only 23 percent said they expected price declines over the next year, unchanged from September.
With the share who expected home prices to stay the same increasing from 35 percent to 36 percent, the net share of those expecting home prices to go up in the next 12 months decreased by two percentage points from September.
While many would-be homebuyers would undoubtedly welcome cooling home price appreciation or price declines, the HPSI treats a drop in consumer expectations that prices will appreciate as a negative.
With mortgage rates soaring to new highs when Fannie Mae surveyed consumers during the first half of October, the percentage who said they expected mortgage rates to go up in the next 12 months increased to 47 percent, up from 46 percent in September.
The percentage of respondents who thought mortgage rates would retreat also decreased to 16 percent, down from 17 percent in September. With the share who thought mortgage rates would stay the same decreasing from 37 percent to 36 percent, the net share of those who think mortgage rates will go down over the next 12 months decreased by 1 percentage point from September.
Many economists and bond market investors expect mortgage rates to come down next year, particularly if the economy enters a recession and the Federal Reserve moves to cut interest rates. But with the economy decelerating more slowly in the face of Fed rate hikes than some had expected, mortgage rates aren’t expected to come down as dramatically next year as economists had previously anticipated.
Most Americans who have a job aren’t worried about losing it, which makes them feel more secure about buying a home.
The percentage of consumers who said they weren’t concerned about losing their job in the next 12 months increased to 78 percent in October, up from 75 percent in September. With the percentage who said they were concerned decreasing to 21 percent, the net share of those who aren’t concerned about losing their job increased by 5 percentage points from September.
While wage increases may not be keeping up with inflation for many Americans, 20 percent of consumers polled by Fannie Mae in October said their household income was “significantly higher” than 12 months ago, up from 18 percent in September. The percentage who said their household income was significantly lower also decreased to 10 percent, down from 13 percent in September.
With the percentage who said their household income was about the same increasing to 69 percent, the net share of those who said their household income was significantly higher increased by 5 percentage points from September.
While consumers’ views of whether the economy is on the right or wrong track aren’t factored into the HPSI, doubts about the strength of the economy could affect homebuying decisions.
The percentage of consumers who said the economy is on the wrong track increased by 7 percentage points from September to October, to 78 percent, while the share of consumers who said the economy is on the right track decreased by the same amount, to 21 percent.
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