Homebuyers and sellers are being cautious due to current market conditions, as indicated by Fannie Mae‘s home purchase sentiment index (HPSI). The HPSI — which tracks the housing market and consumer confidence to sell or buy a home — decreased 3.6 points in February to 58.0, breaking a streak of three consecutive monthly increases, according to Fannie Mae.
“The decline was partly driven by a substantial decrease in consumers’ sense of home-selling conditions, with most respondents who indicated it’s a ‘bad time to sell’ citing unfavorable economic conditions and mortgage rates as the primary reasons for that belief,” Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a statement.
Overall, four of the HPSI’s six components decreased month over month, most notably those associated with job security and home-selling conditions.
The percentage of respondents who say it is a good time to sell a home decreased to 54% from 59% the month prior, while the percentage who say it’s a bad time to sell increased to 44% from 39%.
And, about 24% of the respondents said they were concerned about losing their job, up from the previous month’s 18%.
“We believe these results (HSPI) corroborate our expectation for subdued home sales in the coming quarters, particularly now that mortgage rates have begun rising again,” Duncan said.
The seasonally adjusted sales pace for existing homes in January dropped 0.7% from the month prior to a pace of 4 million, which marked the lowest level of home sales activity since May 2020.
The Mortgage Bankers Association expects the total existing home sales to decline to 4.3 million in 2023 from last year’s 5.1 million and new home sales to drop to 615,000 from the previous year’s 643,000.
“This month’s survey indicated an increase in job security concerns, which we’ll continue to monitor closely, since labor market uncertainty could play yet another factor in slowing housing activity,” Duncan said.