By PJ Wade – Decisions & Communities | June 15, 2021
According to Fannie Mae’s latest Home Purchase Sentiment Index® (HPSI), only 35% of respondents believe it’s a good time to buy a home.
What do you believe and why?
This is the second consecutive month the HPSI revealed a more pessimistic homebuying perspective—down 53% from March to an historic low, even though the personal finance components of job security and household income improved. The negative view of homebuying, reportedly reflects supply limitations and declining affordability.
What do you think?
The HPSI is similar to a variety of established indices of consumer sentiment and confidence like the Consumer Price Index. HPSI was created in March 2011 at 60 points as an indicator of current and future housing market conditions.
“The HPSI remained relatively flat in May [increasing by 1.0 point to 80.0], 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 Fannie Mae’s 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.”
Fannie Mae’s monthly National Housing Survey (NHS) reaches out to approximately 1,000 respondents by telephone to ask more than 100 questions designed to assess their housing attitudes. Six of these questions are grouped as the monthly HPSI. The latest HPSI revealed four of the six components were up and only two down. During each month’s NHS, HPSI is calculated by taking the average across the six questions of the net percent of answers that were positive.
The HPSI fluctuates each month. If you are serious about buying a resale or new home, you’ll need to take a more measured approach to homebuying. On-again, off-again, back-and-forth buying hesitations amount to indecision which may distract you from making a confident and successful buying decision.
The Index and its survey outcomes may not be as immediately useful to those considering a home purchase as the six HPSI questions asked in the survey. Consider the six HPSI components they represent as context for your perspective on homebuying. Look for ways that an enlightened buying context can improve your decision making and reveal overlooked opportunities.
What do your responses to the six HPSI questions reveal about your attitude to homebuying?
#1. Good Time to Buy or Bad Time to Buy?
The percentage of survey respondents who said it is a good time to buy decreased 12%. “A bad time to buy” responses increased 8% so “the net share of those who say it is a good time to buy decreased 20 percentage points month over month.”
Question #1: In general, do you think this is a very good time to buy a house, a somewhat good time, a somewhat bad time, or a very bad time to buy a house?
As you consider your answer, review the factors most relevant to your choice and ability to buy: current home prices, availability of suitable homes, mortgage rates, mortgage qualification, and personal finance issues like job security and income. Or are you reacting to different buying factors?
If your main influence is what others—often unknown or questionable sources—say on social media, you may discover your confidence ebbs and flows with each post, tweet, or text. Are you reacting instead of thinking?
#2. Good Time to Sell or Bad Time?
The minor increase (1%) in respondents who said it was a good time to sell was created by a small decrease in those who said it was a bad time to sell.
Question #2: In general, do you think this is a very good time to sell a house, a somewhat good time, a somewhat bad time, or a very bad time to sell a house?
With 67% saying it’s a good time to sell, why do you think the number of listings is a limiting factor in many areas?
#3. Home Price Expectations?
“The net share of Americans who say home prices will go up decreased 2 percentage points month over month.” Forty-seven percent said prices will go up; 17% said prices will go down [unchanged]; 29% said prices will stay the same.
Question #3: During the next 12 months, do you think home prices in general will go up, go down, or stay the same as where they are now?
We may all have opinions on home price fluctuations, but at very best these opinions are merely guesses—some more informed than others.
If you are “sure” about the future of home prices, this will influence your decision making. Where did your firm belief come from—fact, fiction, or hearsay?
#4. Mortgage Rate Expectations?
The net share of Americans who said mortgage rates will decrease increased 4 percent, month over month based on the percentage who felt rates will go up decreasing to 49%, those who said rates will stay the same increasing to 38%, and 6% saying rates would go down over the next 12 months.
Question #4: During the next 12 months, do you think home mortgage interest rates will go up, go down, or stay the same as where they are now?
Real estate and mortgage professionals are frequently asked what the mortgage interest rate will be. They know many things, but not this. Since rate fluctuations are based on financial complexities, who knows? The future interest rate is one of the biggest guesses of all.
How would a rate increase or decrease impact your buying decision? That’s what you want to be sure about.
#5. Job Concerns?
The percentage of respondents who are not concerned about job loss in the next 12 months increased to 87% while those with job concerns dropped to 12%. Overall, those not concerned about job loss increased 11%.
Question #5: How concerned are you that you will lose your job in the next twelve months? Are you very concerned, somewhat concerned, not very concerned, or not at all concerned that you will lose your job in the next twelve months?
In uncertain times, certainties like job security—which you do not control—can become hazzards. Explore industry predictions for the sector you work in. Consider a conservative financial approach if job loss would leave you unable to meet mortgage and other responsibilities of homeownership. What could make your job precarious?
#6. Household Income?
The 12% net share increase of those whose income is much higher now was created by: a decrease from 57% to 54% for those who said their income is higher now, 29% percent saying their income is significantly higher, and 13% responding that their income is significantly lower.
Question #6: Is your household income significantly higher than it was 12 months ago, significantly lower, or about the same?
When it comes to income, the amount you keep can be more important than the total you earn. Careful budgeting, conscientious saving, and commitment to homeownership can outweigh a credit-card-driven lifestyle. Do you invest in professional development and education to keep your income and workplace value climbing?
How are you establishing your context for confident homebuying decisions?