While consumers' comfort with their financial situation appears to be improving, their pessimism about homebuying is also growing. Fannie Mae says while its Home Purchase Sentiment Index (HPSI) did tick up by 1.0 point in May to 80.0, the component reflecting responses about whether it is a good time to buy fell to a second consecutive all-time low.
The HPSI reflects answers to some questions from the monthly National Housing Survey including the good time to buy as well as a comparable query about selling. Only 35 percent of respondents said it is a good time to buy in May, down from 53 percent in March. The net positive answers (yes responses minus no responses) to the question fell to a negative 20 percent, down 34 points year-over-year.
Positive answers to the question about selling rose 1 point to 67 percent. The net positive of 42 percent is 72 points higher than a year ago.
"The HPSI remained relatively flat in May, although some of its underlying components shifted significantly, with consumers feeling substantially more positive about their jobs and income, while at the same time showing even greater pessimism about homebuying conditions compared to last month," said Doug Duncan, Senior Vice President and Chief Economist. "The 'good time to buy' component fell further -- hitting another all-time survey low - as consumers appear to be acutely aware of higher home prices and the low supply of homes, the two reasons cited most frequently for that particular sentiment. However, despite the challenging buying conditions, consumers do appear more intent to purchase on their next move, a preference that may be supported by the expectation of continued low mortgage rates, as well as the elevated savings rate during the pandemic, which may have allowed many to afford a down payment."
As Duncan noted, although the question is not among those included in the HPSI, 72 percent of respondents to the survey said they intended to buy the next time they moved.
The percentage of respondents who say home prices will go up in the next 12 months decreased from 49 percent to 47 percent while the share of responses that prices will go down was unchanged at 17 percent. Twenty-nine percent expect prices to stay the same, up 2 points from April.
The share of consumers who expect mortgage rates to rise over the next 12 months dropped 5 points month-over-month, leaving the net at a negative 43 percent compared to -47 percent the previous month.
The percentage of respondents who are not concerned about losing their job in the next 12 months increased from 80 percent to 87 percent and the net of those who expressed no concern was 11 points higher than in April at 75 percent.
A higher household income over the past year was reported by 29 percent of respondents, up from 21 percent the prior month, while those reporting a lower income declined from 17 to 13 percent. The net share reporting higher income was up 16 points from April at 12 percent.
The HPSI reading of 80.0 is 12.5 points higher than the index in May 2020.
The National Housing Survey from which the HPSI is constructed, is conducted monthly by telephone among 1,000 consumers, both homeowners and renters. In addition to the six questions that are the framework of the index, respondents are asked questions about the economy, personal finances, attitudes about getting a mortgage, and questions to track attitudinal shifts.