Consumer home buying sentiment bounces back from all-time low

“Both consumer homebuying and home-selling sentiment are significantly lower than they were last year, which, in our view, is unsurprising considering mortgage rates have more than doubled, and home prices remain elevated,” said Doug Duncan, Fannie Mae chief economist. “Following eight months of consecutive declines, the HPSI did tick up slightly in November but is essentially unchanged since hitting its all-time low last month.”

Other HPSI component highlights include:

The net share of Americans who expect home prices to go up in the next 12 months jumped three percentage points from October to 30% in November.
The net share of Americans who believe mortgage rates will go down in the next 12 months increased seven percentage points to 10%.
The net share of Americans who say they are not concerned about losing their job in the next 12 months decreased 13 percentage points to 78%.
The net share of Americans who reported that their household income is significantly higher than it was 12 months ago stayed the same at 27%.

“Consumers continue to expect mortgage rates to rise but home prices to decline, a situation that we believe will contribute to a further slowing of home sales in the coming months, as both homebuyers and home-sellers have a reason for apprehension,” Duncan said. “We expect mortgage demand to continue to be curtailed by affordability constraints, while homeowners with significantly lower-than-current mortgage rates may be discouraged from listing their property and potentially taking on a new, much higher mortgage rate.”

Mortgage applications decreased 1.9% on a seasonally adjusted basis despite the consecutive declines in mortgage rates, according to the Mortgage Bankers Association’s latest report. The contract rate on a 30-year fixed mortgage dropped for the fourth straight week on Dec. 2, down eight basis points to 6.41%.

What are your client’s views on the current housing market environment? Let us know in the comments below.