Government LendingHousing MarketMortgage Rates

8 of 10 consumers: “Economy is on the wrong track”

Fannie Mae's Home Purchase Sentiment Index plunges to the second-lowest reading in a decade

Roughly eight in 10 consumers participating in a recent survey are frustrated with the housing market, inflation and the increasingly worsening economy — reflecting record-setting dissatisfaction from respondents of Fannie Mae‘s Home Purchase Sentiment Index (HPSI).

The index, which tracks consumer confidence in the housing market, fell 3.4 points from May to June, dropping to 64.8 — its second-lowest reading in a decade. Compared with the same period last year, the index is down 14.9 points.

“In June, a survey-record 81% of consumers reported that the economy is on the wrong track, suggesting to us, and corroborated by other recently released consumer confidence measures, that people appear to be growing increasingly frustrated with inflation and the slowing economy,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. 

Additionally, four of the index’s six components, those asking consumers whether it’s a good time to buy, sell and in what direction they expect mortgage rates will move, decreased from May to June.

About 21% of survey respondents also expressed job stability concerns, the highest percentage in 18 months. And approximately half of all surveyed said it would be “difficult” to get a mortgage, the greatest number since 2014. 

“This month’s HPSI reading reflects these macroeconomic and personal financial concerns, with housing sentiment additionally diminished by the recent rapid increases in mortgage rates,” Duncan said. 

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Mortgage rates, following the Federal Reserve‘s inflation-fighting monetary policy, averaged 5.30% this week, according to the latest Freddie Mac PMMS index. Rates have been trending downward in recent weeks, but it’s still well over the 2.90% 30-year fixed-rate purchase rates the same period a year ago. 

The HPSI results for June are consistent with the Fannie Mae Economic and Strategic Research Group’s forecast of a slowing housing market through the rest of 2022 and 2023, Duncan added.  

Citing higher mortgage rates as the housing market’s “primary constraint,” the ESR Group projected total home sales to fall 13.5% to 5.96 million units in 2022. About 5.29 million homes are expected to sell in 2023. 

The GSE also lowered its projections of mortgage originations to $2.6 trillion in 2022 and $2.2 trillion in 2023. Regarding the overall economy, Fannie Mae raised the second quarter GDP to 2.5% for 2022 but said it will be offset by a slower growth forecast in the latter half of the year as inflation continues to eat into real incomes.

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