Fannie Mae: Affordability, Interest Rates Subdue Housing Market

Its latest survey data show the majority of U.S. consumers expect home prices to decrease or remain flat over the next year.

By Rethinking65

The percentage of U.S. adults who think it’s a good time to buy a house continues to fall, according to Fannie Mae.

Overall, the Fannie Mae Home Purchase Sentiment Index (HPSI) increased slightly in January for the third consecutive month, but it is still way below its pre-pandemic high. Home-selling conditions, home-price outlook and household income contributed to a 0.6-point increase in the index, bringing it to 61.6. Other factors exerted downward pressure. Compared with the same time last year, the index is down 10.2 points.

For example, in January only 17% of respondents believed it was a good time to buy, down from 21% a month earlier. The percentage of respondents who say it is a good time to sell a home increased from 51% to 59%. The percentage of respondents who say home prices will go up in the next 12 months increased from 30% to 32%.

“January’s HPSI results showed that consumer sentiment toward the housing market remains subdued by historical standards,” said Doug Duncan, Fannie Mae senior vice president and chief economist.

“For consumers, the same affordability issues are persisting, as they continue to indicate that high home prices and high mortgage rates make it a ‘bad time to buy’ a home,” he added. “The latest survey data also indicated that the majority of consumers expect home prices to decrease or remain flat over the next year, which may incentivize some potential homebuyers to delay their purchase decision.

“Although ‘good time to sell’ sentiment ticked upward this month, it’s still much lower than it was a year ago, as purchase affordability remains seriously constrained and mortgage demand has receded. Until we see improvements in affordability via lower home prices and mortgage rates, we expect home sales to remain muted in the coming months.”

Fannie Mae’s HPSI index is based on answers to its monthly National Housing Survey. It conducted the January survey between January 3 and 20, 2023.

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