Consumer purchase sentiment dips after three months of increases

With COVID-19 cases on the upswing again, consumer confidence in the housing market appears to be moderating somewhat.

Fannie Mae’s Home Purchase Sentiment Index (HPSI), which tracks views of housing market conditions among consumers, fell 1.7 points month over month in November to a level of 80.0. The slight backtrack puts an end to three straight months of increasing readings, and is now down 11.5 points compared to the same time in 2019.

“The HPSI appears to have peaked for now as consumers continue to consider how COVID-19 impacts their ability to buy or sell a home,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist. “This follows the HPSI’s recovery of slightly more than half of the loss experienced during the first few months of the pandemic.”

The HPSI is derived from answers to six questions asked to approximately 1,000 respondents via telephone interview. The HPSI includes six component indices corresponding to the six survey questions, with three of those six components decreasing on a monthly basis in November.

Notably, the percentage of survey respondents who believe it’s a good time to buy a home fell from 60% in October to 57% in November. With the share of respondents who believe it’s a bad time to buy staying the same, the net share of people who say it’s a good time to buy decreased three percentage points month over month.

Consumers also reported a more pessimistic view of their job security, with the net share of people who are not concerned about losing their jobs dropping six percentage points from October to November. Mortgage rate expectations saw a considerable shift, as the net share of those who say rates will go down over the next 12 months decreased 14 points month over month.

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Meanwhile, the percentage of respondents who think it’s a good time to sell a home held steady at 59% in November, while those who say it’s a bad time to sell receded from 35% to 33%. As a result, the net share of those who say it’s a good time to sell grew two percentage points. Survey participants also expressed more confidence in their own financial situations, with the net share of those who said their household income is “significantly higher” than it was 12 months ago up three percentage points.

More people also think home prices will increase in the next year. The share of respondents who believe prices will climb in the next 12 months crept up from 40% to 41%, while the share who think prices will go down dropped from 20% to 13%. The share who believe they will stay the same grew from 31% to 35%, resulting in the net share of those who expect price growth increasing eight percentage points in November.

It bears mentioning that the gap in sentiment between homeowners and renters isn’t at its highest, but it’s close.

“Drilling down a bit, home purchase confidence has recovered more for homeowners than for renters, in part because homeowners have been less likely than renters to have had their jobs and finances impacted by the pandemic,” Duncan said. “Interestingly, the gap between the HPSI broken out by the homeowner and renter subgroups hit a survey high in August but, despite narrowing slightly, remains elevated and well above the survey average.”


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