As housing affordability continues to decline, consumers are losing hope. 

The Fannie Mae Home Purchase Sentiment Index® (HPSI) dropped 1.2 points in September to 60.8. The index now sits at its lowest level since October 2011 after declining for its seventh straight month. 

Fannie-Mae-Home-Sentiment-graph

Source: Fannie Mae September 2022 Data Release

Survey respondents shared their expectations regarding mortgage rates, home prices, changes in household income, and concerns over loss of employment. 

For the first time in over two years, more respondents said they expect home prices to go down instead of up. Not only that, but most respondents also believe it’s a bad time to buy. Year-over-year, the full index dropped 13.7 points. 

So, what does this mean for your clients?

Fannie Mae September 2022 Survey on Housing Sentiment

The Home Purchase Sentiment Index distills responses to six key questions from Fannie Mae’s National Housing Survey into a single number. 

That number has declined for seven consecutive months, largely due to affordability constraints from widespread inflation and higher mortgage rates

The HPSI declined this month to its lowest level since October 2011. 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. Moreover, 75% 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. 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.

Doug Duncan

Fannie Mae Senior Vice President and Chief Economist

The National Housing Survey

Fannie Mae asked over 100 questions of roughly 1,000 respondents (via telephone interview) for its National Housing Survey (NHS) to gauge their attitudes toward the following: 

  • Homeownership and renting
  • Home and rental price changes
  • The economy
  • Household finances
  • Consumer confidence 

Fannie Mae has conducted this monthly survey since June 2010 to assess month-by-month and year-by-year changes in consumer sentiment. 

The Home Purchase Sentiment Index® (HPSI) is based on six NHS questions that gauge consumer expectations regarding the U.S. housing market and purchasing power: 

  1. Do you think it’s a good/bad time to buy a home?
  2. Do you think it’s a good/bad time to sell a home?
  3. Do you expect home prices to increase, decrease, or stay the same?
  4. Do you expect mortgage rates to increase, decrease, or stay the same?
  5. Are you concerned about losing your job?
  6. How does your household income compare to a year ago—significantly higher, significantly lower, or roughly the same?

Results of the National Housing Survey

The September 2022 survey yielded the following results. 

Buying:

  • 19% of respondents say it’s a good time to buy a home—down from 22%
  • 75% say it’s a bad time to buy—up from 73%

Selling: 

  • An unchanged 59% of respondents say it’s a good time to sell a home
  • 33% say it’s a bad time to sell—down from 35%

Housing Price Expectations: 

  • 32% expect home prices to go up in the next 12 months—down from 33%
  • 35% expect home prices to go down—up from 33%
  • An unchanged 28% expect home prices to remain the same

Mortgage Rate Expectations: 

  • 9% expect mortgage rates to go down in the next 12 months—down from 11%
  • 64% expect mortgage rates to go up—up from 61%
  • 20% expect mortgage rates to remain the same—down from 25%

Job Loss Concern:

  • 78% are not concerned about losing their job in the next 12 months—down from 79%
  • An unchanged 21% say they are concerned about job loss

Household Income:

  • 26% say their household income is significantly higher than it was 12 months ago—up from 25%
  • 11% say their household income is significantly lower—down from 15%
  • 61% say their household income is roughly the same—up from 59%

Summary of Net Results: 

  • 5% fewer Americans believe it’s a good time to buy a home
  • 2% more believe it’s a good time to sell a home
  • 3% fewer expect home prices to go up
  • 5% fewer expect mortgage rates to go down
  • 1% fewer respondents say they’re not worried about losing their jobs
  • 5% more say their household income is significantly higher than it was a year ago

The net changes are small but meaningful, especially those that signal a change in direction. 

Top takeaways for real estate agents

Fluctuations in the housing market are unavoidable. But that doesn’t erase the responsibility of real estate agents to stay on top of the latest market data and news that could impact the buyers and homeowners in their area. 

The most alarming headlines typically exaggerate how a particular shift in the market will affect them. This is where you come in. 

Use the data at your disposal to educate your community and give your clients an edge. You don’t have to play down the negatives; use all the information to give consumers a complete picture of what’s happening. 

The better you understand and communicate how each change in the market can affect them, the more of an impact you can have on home purchasing sentiment in your area.