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Homebuyer sentiment hits new low for 3rd month in a row

Fewer than one in five Americans think it’s a good time to buy a home, with uncertainty about the economy adding to worries about listings shortages, rising home prices and mortgage rates.

Fannie Mae’s monthly latest National Housing Survey, released Tuesday, found that the percentage of Americans who think it’s a good time to buy a home fell to 17 percent in May, breaking previous record lows of 19 percent seen in April and 24 percent in March. Fannie Mae has been conducting the monthly telephone surveys of 1,000 consumers since 2010.

“Consumers’ expectations that their personal financial situations will worsen over the next year reached an all-time high in the May survey, and they expressed greater concern about job security,” said Fannie Mae Chief Economist Doug Duncan, in a statement.

Source: Fannie Mae National Housing Survey, May 2022.

Fannie Mae’s overall Home Purchase Sentiment Index (HPSI), which is based on six survey questions, decreased by just 0.3 points in May, to 68.2. But that’s an 11.8 point drop from a year ago, bringing the index closer to its pandemic-low of 67.5, seen in April 2020.

Although 76 percent of those surveyed said it was a good time to sell, rising mortgage rates are likely to make some would-be sellers reluctant to give up their existing mortgages.

Doug Duncan

“These results suggest to us that increased mortgage rates, high home prices, and inflation will likely continue to squeeze would-be homebuyers – as well as those potential sellers with lower, locked-in mortgage rates – out of the market, supporting our forecast that home sales will slow meaningfully through the rest of this year and into next,” Duncan said.

In a May 19 forecast, Fannie Mae economists said they expect home sales to decline by 11.1 percent this year and by another 11.6 percent in 2023, even with home price appreciation expected to cool down into the single digits next year.

Source: Fannie Mae National Housing Survey, May 2022.

Although not a component of the Home Purchase Sentiment Index, only 15 percent of those surveyed by Fannie Mae in May, thought the economy is on the right track, down from 20 percent in April.

Source: Fannie Mae National Housing Survey, May 2022.

The share of consumers, who expect their personal financial situations to worsen over the next 12 months, increased by 7 percentage points to 30 percent — a new survey high.

Home Purchase Sentiment Index components

Three of the six components that make up the Home Purchase Sentiment Index deteriorated in May, with respondents less optimistic than they were in April about buying conditions, prospects for their incomes to grow and keeping their jobs.

But the survey found Americans were slightly more optimistic about selling conditions, the outlook for home prices to keep appreciating and for mortgage rates to moderate.

The percentage of respondents who said it’s a good time to buy a home decreased to 17 percent, while the percentage who say it is a bad time to buy increased 79 percent. As a result, the net share of those who say it is a good time to buy decreased 5 percentage points from April to May, to -62 percent, a new survey low.

The percentage of respondents who said it’s a good time to sell a home increased to 76 percent in May, while the percentage who say it’s a bad time to sell decreased to 19 percent. As a result, the net share of those who say it is a good time to sell increased 6 percentage points month over month, to 57 percent.

The percentage of respondents who say home prices will go up in the next 12 months increased by 5 percentage points in May, to 47 percent. Only 23 percent thought home prices will go down in the next year. That’s in line with forecasts by Fannie Mae economists, who expect national home price appreciation to cool to the single digits by the fourth quarter of 2023.

Although 70 percent of those surveyed in May said they expected mortgage rates to keep going up over the next 12 months, that’s down from 73 percent in April. Only 4 percent of those surveyed expect mortgage rates to come down, while 20 percent expect them to stay the same. The net share of Americans who expect mortgage rates to go down over the next 12 months was up 2 percentage points from April.

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