Consumer sentiment toward housing declined further in September, down to its lowest level since October 2011, as measured by the Fannie Mae Home Purchase Sentiment Index (HPSI). The index dropped 1.2 points to 60.8 and is 13.7 points lower than the same time last year.
Homebuying Sentiment Declines over August
The share of survey respondents saying it is a bad time to buy continued to outnumber those saying it is a good time by almost four-to-one, with a net bad time to buy of 56%, 18 percentage points more than last year. This figure has declined by 5 percentage points over August as the number of respondents who think it is a bad time to buy increased by 3 percentage points and those who think it’s a good time to buy decreased by 3 percentage points.
Homebuyers continue to cite high home prices and high interest rates as primary deterrents. Recent Realtor.com housing data shows that price growth is moderating. In September, the median listing price of homes grew by 13.9% year-over-year, down from a growth rate of 15.4% in August, but it remains elevated at $427,250. At the same time, the net share of survey respondents who believe home prices will go up in the next 12 months has decreased by 3 percentage points from last month and 16 percentage points from last year.
The net share of respondents who believe mortgage rates will go down decreased by 5 percentage points from the previous month and 12 percentage points from the previous year. Over the past 10 months, rising mortgage rates have decreased home purchasing budgets. For a family earning the median household income of $71,000 and using a 20% down payment, a typical home purchase budget stretched to $448,700 in January 2022 when rates were close to 3%. Now, the same family could only afford a $343,000 home with rates almost 7%.
Home-Selling Sentiment Improves Slightly
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 compared to last year. The net share of respondents saying now is a good time to sell increased by 2 percentage points compared to last month, after a 16 percentage point drop from July to August. However, the net share saying now is a good time to sell has decreased by 29 percentage points compared to the previous 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 2021 peak of 77%. These findings align with changing consumer expectations around price growth, as the net share of survey respondents who believe home prices will go up in the next 12 months decreased by 3 percentage points from last month and 16 percentage points from last year.
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