More consumers expect mortgage rates and home prices to rise even further 

The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index® (HPSI) increased by 3.5 points to 75.3 in February, but affordability constraints continue to drive consumers’ perception of the housing market. Overall, five of the index’s six components increased month over month, including the components measuring consumers’ perceptions of homebuying and home-selling conditions. However, on net, the ‘Good Time to Buy” component remains near its recently established record low, as survey respondents continue to cite high home prices as the primary impediment to purchasing. Consumers did report a substantially improved sense of job security, but a much greater share indicated that they expect mortgage rates to move even higher. Year over year, the full index is down 1.2 points. 

“A survey-record share of consumers – particularly homeowners and higher-income individuals – expect mortgage rates to increase in the next 12 months, likely owing to signals that the Fed will raise rates to slow the pace of inflation,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “High home prices continue to be the most commonly cited reason by consumers for their belief that it’s a good time to sell (and a bad time to buy) a home; notably, the ‘good time to buy’ sentiment among renters dropped to a new survey low. This suggests that homeowners and higher-income groups may recognize the importance of getting ahead of the rising rate environment, while renters are keenly feeling the double constraint on home purchase affordability of rising house prices and rising interest rates.” 

Duncan continued: “Nonetheless, the HPSI increased moderately in February, though the index still remains slightly lower on a year-over-year basis. Continued negative perceptions around homebuying conditions were offset in part this month by consumers’ increased sense of job security, which we believe is likely due to labor market tightness and declining COVID case counts. However, with recent geopolitical events creating additional economic uncertainty – including likely increasing inflationary pressure – we believe the additional headwinds will compound existing affordability constraints to further soften mortgage demand in the coming year. It’s worth noting that this month’s National Housing Survey® was conducted between February 1 and February 22, prior to the Russian invasion of Ukraine.” 

Home Purchase Sentiment Index – Component Highlights 

Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased in February by 3.5 points to 75.3. The HPSI is down 1.2 points compared to the same time last year. Read the full research report for additional information. 

• Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home increased from 25% to 29%, while the percentage who say it is a bad time to buy decreased from 70% to 67%. As a result, the net share of those who say it is a good time to buy increased 7 percentage points month over month. 
• Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home increased from 69% to 72%, while the percentage who say it’s a bad time to sell remained unchanged at 22%. As a result, the net share of those who say it is a good time to sell increased 3 percentage points month over month. 
• Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months increased from 43% to 46%, while the percentage who say home prices will go down increased from 14% to 16%. The share who think home prices will stay the same decreased from 35% to 32%. As a result, the net share of Americans who say home prices will go up increased 1 percentage point month over month. 
• Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 4% to 3%, while the percentage who expect mortgage rates to go up increased from 58% to 67%. The share who think mortgage rates will stay the same decreased from 28% to 22%. As a result, the net share of Americans who say mortgage rates will go down over the next 12 months decreased 10 percentage points month over month. 
• Job Concerns: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 78% to 87%, while the percentage who say they are concerned decreased from 17% to 9%. As a result, the net share of Americans who say they are not concerned about losing their job increased 17 percentage points month over month. 
• Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago increased from 26% to 27%, while the percentage who say their household income is significantly lower decreased from 14% to 12%. The percentage who say their household income is about the same remained unchanged at 56%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased 3 percentage points month over month.