Buyer and seller sentiment regarding the housing market continued to diverge in June, according to the most recent update to Fannie Mae’s Home Purchase Sentiment Index (HPSI).
The overall index moved little in June, decreasing by 0.3 points to a reading of 79.7. Of larger note was the volatility among the component indices gauging sentiment among homebuyers and home sellers. The percentage of respondents who said it’s a good time to buy a home decreased from 35% to 32%, while the percentage who said it’s a bad time to buy increased from 56% to 64%. As a result, the net share of those who say it is a good time to buy decreased 11 percentage points month over month.
Predictably, the “sell” side saw a similar — and in fact, even bigger — swing to the positive. The percentage of respondents who said it is a good time to sell a home increased from 67% to 77%, while the percentage who said it’s a bad time to sell decreased from 25% to 15%. As a result, the net share of those who say it is a good time to sell increased 20 percentage points month over month.
“The HPSI remained flat this month, although its underlying buy and sell components continued to diverge, setting record positive and negative readings, respectively,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist. “Consumers also continued to cite high home prices as the predominant reason for their ongoing and significant divergence in sentiment toward homebuying and home-selling conditions.”
Pessimism about homebuying is especially stark among buyers at the entry-level end of the housing market, where the ongoing inventory shortage and sizzling demand have led to many getting priced out of homeownership.
“While all surveyed segments have expressed greater negativity toward homebuying over the last few months, renters who say they are planning to buy a home in the next few years have demonstrated an even steeper decline in homebuying sentiment than homeowners,” Duncan said. “It’s likely that affordability concerns are more greatly affecting those who aspire to be first-time homeowners than other consumer segments who have already established homeownership.”
Consumers, nonetheless, appear to think that price growth has to slow down at some point soon, with the net share of respondents who say home prices will go up decreasing 3 percentage points month over month. Meanwhile, the net share of those who say mortgage rates will go down over the next year is also down, falling 8 percentage points month over month.
The component indices of the HPSI that correlate to household finances were generally flat monthly but remain up on an annual basis. The net share of those who say they are not concerned about losing their job increased 2 percentage points month over month, while the net share of those who say their household income is “significantly higher” than it was 12 months ago is down 2 percentage points monthly as well.
Despite persisting discouragement among homebuyers, Duncan expects demand for homes to stay elevated through 2021.
“Mortgage rates remain not too far from their historical lows,” he explained, “and consumers are expressing even greater confidence about their household income and job situation compared to this time last year, when the pandemic had shut down wide swaths of the economy.”