BAM Key Details:
- The Fannie Mae Home Purchase Sentiment Index® (HPSI) continued its recent upward trend in April, climbing 5.5 points to 66.8—the highest since May 2022.
- All six HPSI components increased from the previous month, particularly consumer expectations of mortgage rates.
The Fannie Mae Home Purchase Sentiment Index® (HPSI) climbed 5.5 points to 66.8 in April, reaching the highest point since May 2022.
All six HPSI components improved month over month, particularly the one associated with consumer expectations of mortgage rates. While this component is still in the negative overall—with more respondents indicating they expect rates to go up over the next 12 months—22% indicated in April that they expect rates to go down, compared to 12% the month before.
That said, the persistence of affordability constraints has impacted consumer sentiment on the housing market, with only 23% of survey respondents saying it’s a “good time to buy a home.” But, once again, a plurality believe home prices will increase over the next year.
The full HPSI is down 1.7 points compared to a year ago.
This month’s increase in the HPSI was the largest in over two years, primarily driven by consumers’ more optimistic mortgage rate expectations. An increased number of respondents indicated they think mortgage rates will go down over the next year, a belief that could be due to a combination of factors, including an awareness of decelerating inflation, market suggestions that monetary conditions will ease in the not-too-distant future, and, of course, actual mortgage rate declines during the month.
While the HPSI is continuing its recent upward trend, Duncan believes the uptick in optimism may be short-lived as many consumers remain uncertain as to the direction of home prices. And high home prices are still the main reason given by those saying it’s a “bad time to buy.”
Until affordability improves for a larger swath of the homebuying public, we believe home sales will remain subdued compared to previous years.
Housing sentiment continues climbing
The HPSI uses six of the questions from the National Housing Survey to assess consumer attitudes toward the housing market—particularly the following six components:
- Mortgage rate outlook
- Housing price outlook
- Buying conditions (good/bad time to buy)
- Selling conditions (good/bad time to sell)
- Job loss concern
- Changes in household income
Thanks to net positive changes in all six components, compared to the previous month, the full HPSI has continued an upward trend that started between February and March of 2023.
Good time to buy—or sell
The share of survey respondents saying it’s a good time to buy increased month over month to 23% in April. And while the net response to that question is still in the negative (-54), it rose six points compared to March and three points compared to a year ago.
As for the question of whether it’s a good or bad time to sell, the share of respondents saying it’s a good time rose to 62% and the net result is still in the positive (+23%), rising five points in April while declining 28 points from a year ago.
Home price and mortgage expectations
The net share of respondents who believe home prices will go up climbed 5 points from the previous month, with 37% saying home prices will go up and 32% saying they’ll go down. The net result is still down 14 points compared to a year ago.
The net share of respondents who believe mortgage rates will go down over the next 12 months climbed 13 percentage points to -26%, up 42 points from a year ago.
Job security and household income
The net share of respondents not worried about losing their jobs climbed one point to 58%, with 21% concerned about losing their jobs and 79% not concerned. The net result is down 15 percentage points compared to a year ago.
The net share of respondents saying their household income is significantly higher than it was a year ago climbed four percentage points to 13%, with 24% indicating a significant increase, and 11% indicating a significant decline. The net share indicating no significant change in their household income fell four percentage points to 64%.
The net result is one percentage point higher compared to a year ago.
Buy vs. rent
On average, survey respondents expect rental prices to grow 6.9% and home prices to grow 1.6% over the next 12 months. That figure for the home price increase is 1.8% higher compared to the previous month.
The share of consumers expecting an increase in rental prices rose one percentage point, month over month, to 66%, while the share expecting a drop in rental prices rose five percentage points to 12%.
That leads us to the share of respondents saying they would buy a home if they were going to move, which climbed 2% month over month to 69%. The share saying they would rent declined 1% to 30%.
Top takeaways for real estate agents
While the net result for April’s HPSI is up from the previous month, we still have work to do to educate the public on what’s really happening in the housing market. It doesn’t help that the mainstream media, in general, has a habit of sending the wrong message.
It’s tough enough for consumers right now without trying to decipher which headline is the most accurate and which sources are the most reliable, which is why the Hot Sheet—the industry’s only regular video update on the housing market, based on reliable data sources—airs five days a week.
Tune in every weekday at 9:30 am Eastern. And subscribe to BAM’s YouTube to be notified when a new episode hits the channel.