In an environment of unfavorable mortgage rates, the Fannie Mae Home Purchase Sentiment Index (HPSI) has seen a decline, with consumers' optimism about buying homes reaching an all-time low. The HPSI fell by 2.4 points to 64.5 in September, marking a notable shift in the housing market sentiment.
A record 84% of consumers now view it as a bad time to buy a house, up from previous levels, according to Fannie Mae's Senior Vice President and Chief Economist Doug Duncan. This sentiment has been primarily driven by mortgage rates exceeding 7%, replacing high home prices as the main deterrent for potential buyers. Only 16% of consumers believe it is currently a good time to buy a house.
On the other hand, the number of people who consider it an ideal time to sell their homes also dropped to 63%. This dip is attributed to homeowners' reluctance to give up their 'locked-in' lower mortgage rates, further exacerbating the negative sentiment in the housing market.
Despite this downturn in sentiment, the overall HPSI index is up 3.7 points year over year. However, future expectations are not optimistic, with a 42% prediction of rising home prices and an increase in job loss concern to 23%. The Mortgage Rate Expectations component of the index suggests pessimism, with only 17% expecting a decrease in the next year.
Household incomes are under strain as well, with respondents reporting lower year-on-year incomes. This deterioration in personal economic situations, coupled with reduced job security, is expected to contribute to sluggish home sales into the next year. The lack of affordability relief continues to pose a significant problem for home purchases, emphasizing the challenges faced by potential buyers in the current economic landscape.
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