Housing Confidence Among Consumers Approaching Historical Lows

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Housing Confidence Among Consumers Approaching Historical Lows

Apr 27, 2023 | News | 0 comments

In March 2023, a significant monthly index released by Fannie Mae went up, but with a 3.3 point rise, it remains comparatively low. The current rate of 61.3 is only marginally higher than the index’s record low, which was established late last year, when viewed from a broader perspective.

Among the six major components of the Home Purchase Sentiment Index (HPSI), four showed an increase on a monthly basis, particularly those related to home-selling conditions and job security. In March, 40% of survey respondents felt that it was not a favorable time to sell a home, marking a 4% decrease from February. The figures related to job security also improved, with 21% of individuals expressing concerns about their employment status, compared to 24% in the previous month.

Mark Palim, Fannie Mae’s Vice President and Deputy Chief Economist, stated that despite recent banking turmoil, the HPSI showed a slight increase in March. However, it is still close to its historical low. Most consumers maintain the view that the current period is unfavorable for buying a home, as we approach the spring homebuying season. Homeowners who share this sentiment primarily attribute it to unfavorable mortgage rates, which supports the commonly discussed “lock-in effect” that dissuades many mortgage holders from giving up their lower rates when considering a move. Conversely, surveyed renters once again indicated that high home prices are their main concern when it comes to buying a home.

Palim added that it is not surprising that consumers are also worried about the future direction of home prices. In March, an equal number of respondents believed that home prices will increase or decrease over the next 12 months. The concerns related to affordability constraints, the lock-in effect, and the uncertainty surrounding home price direction are significantly impacting consumers’ decision-making. As a result, Fannie Mae continues to predict that total home sales for the year will remain limited.