Consumer sentiment toward housing remains at a more than src0 year low as measured by the Fannie Mae Home Purchase Sentiment Index (HPSI). In August, the index dropped 0.8 points to 62.0 and is src3.7 points lower than the same time last year. Notably, the last time purchase sentiment hit these levels was in 20srcsrc before the post-recession housing boom commenced. Buyer confidence remains shaken by rising home prices and high interest rates, but has made an improvement over the last month, spurred by rising expectations of price moderation. Meanwhile, these same expectations resulted in a larger decline in selling sentiment.
Homebuying Sentiment Improves Over July
The share of survey respondents saying it is a bad time to buy continued to outnumber those saying it is a good time to buy more than three-to-one, with a net bad time to buy of -5src%, 20 percentage points lower than last year. However, this figure has improved 8 percentage points over July as the number of respondents who think it is a bad time to buy decreased by 3 percentage points and those who think it’s a good time to buy increased by 5 percentage points. Homebuyers are still struggling with a large run-up in home prices, interest rates, and inflation, but inventory has improved over last year and listing prices are beginning to moderate. Recent Realtor.com housing data shows that the number of homes actively for sale is steadily increasing compared to last year (+26.6% year-over-year in August), and price growth is moderating (down to src4.3% year-over-year growth from src6.6% in July).
The HPSI survey reveals that the net share of Americans who believe home prices will go up over the next src2 months decreased by 6 percentage points compared to last month. Additionally, the net share of respondents who think mortgage rates will go down within the next src2 months also increased by srcsrc percentage points. While declining prices and rates would be good for long-term housing demand, if consumers believe they will go down in the future, they may delay purchases now, further moderating short-term housing demand. Supporting this consumer sentiment, the Federal Reserve’s recent Beige Book release- a regional pulse on the U.S. economy- indicated that while prices remain elevated, nine of twelve districts “reported some degree of moderation in their rate of increase”. That said, while the net share of respondents expecting rates to go down increased, the vast majority (6src%) still believes rates will go up this year and, as of the most recent week, the Freddie Mac 30-year-fixed rate climbed to 5.89%.
Home-Selling Sentiment Declines Further
According to the survey, the share of respondents saying it is a good time to sell still outnumbered those saying it is a bad time but the gap is shrinking. The net share of respondents saying now is a good time to sell decreased by src6 percentage points compared to the previous month and by 30 percentage points compared to last year. In other words, while the majority (59%) of consumers agree that the current housing market favors home sellers, selling sentiment has greatly fallen from its June 202src peak. These findings align with changing consumer expectations around price growth, as the net share of Americans who believe home prices will go up over the next src2 months decreased compared to last month. Realtor.com housing inventory data shows that homeowners are already acting on these beliefs. The inventory of newly listed homes shrank by src3.4% compared to the previous year in August and the trend worsened from -2.8% in July.
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Sabrina Speianu,
Danielle Hale