Soaring home prices and dwindling demand have begun to take their toll on consumer sentiment, with the gulf between buyer and seller confidence continuing to widen.
That’s the takeaway from April’s iteration of Fannie Mae’s Home Purchase Sentiment Index (HPSI), which declined by 2.7 points during the month to hit a reading of 79.0.
The index is derived from survey answers to six questions, each of which is tracked via a separate component of the overall index. In April, four of the HPSI’s six components decreased month over month, particularly the component related to homebuying conditions.
The percentage of survey respondents who believe it’s a good time to buy a home decreased from 53% to 47%, while the percentage who say it’s a bad time grew from 40% to 48%. That resulted in a net share of those who say it is a good time to buy decreased 14 percentage points month over month — the first time since the survey began in 2011 that the buying sentiment component has fallen into a net negative.
That drop was offset partially by continuing positive sentiment toward home selling, which continued to climb from last spring, when the pandemic first began, to nearly return to its post-COVID peak.
Year over year, the HPSI is up 16.0 points.
“April’s HPSI reading appears to have been acutely impacted by the ongoing lack of housing supply despite improving economic conditions,” said Doug Duncan, senior vice president and chief economist for Fannie Mae. “Consumer sentiment toward buying homes reached the lowest level in our survey’s ten-year history; unsurprisingly, respondents overwhelmingly cited the lack of supply and high home prices as primary reasons for their pessimism.
“The decrease in homebuying sentiment likely indicates that some consumers, potentially flush with savings — perhaps boosted in part by stimulus payments — may be attempting, but failing, to buy a home due to heightened competition for relatively few listed homes. Notably, consumers in the household income range of $50,000 to $100,000, a range inclusive of the Census Bureau’s reported median household income level, showed a particularly large decrease in overall housing sentiment, and we know that the housing market serving the affordable segment has been particularly competitive.”
“Conversely, consumer positivity regarding home-selling conditions nearly matched its all-time high, demonstrating a large divergence in perceived conditions between sellers and buyers, as measured by the gap between the two components,” Duncan continued. “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.”
As for the other four components, survey respondents weary of watching prices continue to rise appear to be optimistic for — or perhaps hoping to see — some moderation coming up. The net share of survey participants who say home prices will go up decreased 4 percentage points month over month.
Interestingly, survey participants are also expecting mortgage rates, which have recently been on their way up, to reverse course. The net share who say mortgage rates will go down over the next 12 months increased 1 percentage point month over month.
Respondents’ economic concerns also appear to have amplified somewhat in April. The net share of those who say they aren’t concerned about losing their job decreased 1 percentage point from March. The net share of those who say their household income is “significantly higher” than it was 12 months ago also fell, dropping 6 percentage points month over month.