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Fannie Mae: Consumers still wary of housing market

Sentiment towards homebuying conditions net negative — a survey first

Fannie Mae’s Home Purchase Sentiment Index (HPSI), a composite index designed to track the housing market and consumer confidence to sell or buy a home, decreased by 2.7 points to 79 in April 2021 after four of the survey’s six components decreased month over month.

Notable was the drop in sentiment towards homebuying conditions, which was a net negative for the first time in the survey’s history. Year over year, the HPSI is still up 16 points, according to Doug Duncan, Fannie Mae chief economist.

“April’s HPSI reading appears to have been acutely impacted by the ongoing lack of housing supply despite improving economic conditions,” Duncan said. “Unsurprisingly, respondents overwhelmingly cited the lack of supply and high home prices as primary reasons for their pessimism.”

Duncan said the decrease in homebuying sentiment likely indicates that some consumers, with savings account potentially boosted by stimulus payments, may be attempting, but failing, to buy a home due to heightened competition for relatively few listed homes. 

“Consumers in the household income range of $50,000 to $100,000 showed a particularly large decrease in overall housing sentiment, and we know that the housing market serving the affordable segment has been particularly competitive,” Duncan said.

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Borrowers remain pessimistic on the state of home prices, Fannie Mae reported, as the HPSI reported 49% of respondents expect home prices will go up in the next 12 months. Those who believe prices will go down increased, but only to 17% from 14%. A larger percentage of HPSI respondents — 54% — believe mortgage rates will go up.

For the third consecutive week, mortgage rates managed to remain under 3%, dropping three basis points last week to an average of 2.96%. Despite consistent forecasts of a market with rising rates, Fannie Mae reported the 30-year fixed rate mirrored more closely numbers borrowers saw back in February.

Sam Khater, Freddie Mac’s chief economist, pointed to a golden opportunity for homebuyers given the recent economic resurgence.

“Consumer income and spending are picking up, which is leading to an acceleration in economic growth,” Khater said. “The combination of low and stable rates, coupled with an improving economy, is good for homebuyers. It’s also good for homeowners who may have missed prior opportunities to refinance and increase their monthly cash flow.”

The percentage of HPSI respondents who say it is a good time to buy a home decreased from 53% to 47%, while the percentage who say it is a bad time to buy increased from 40% to 48%. The percentage of respondents who say it is a good time to sell a home increased from 61% to 67%, while the percentage who say it’s a bad time to sell decreased from 28% to 26%.

“As has become standard discourse in the housing industry recently, increasing the supply of homes for sale would certainly help bring balance to this strong seller’s market, but unfortunately the most recent data doesn’t suggest that inventory is likely to improve in the near future,” Duncan said.

The percentage of respondents who said they were not concerned about losing their job in the next 12 months decreased from 82% to 80%, per Fannie Mae, and the percentage who said they are concerned decreased from 17% to 16%.

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