Fannie mae last iteration of the monthly Home buying sentiment index (HPSI) edged down 0.5 points to 74.2 in December, with consumers differing wildly on whether it’s a good time to buy or sell a home and their outlook on the economy. When combined, these metrics may indicate a slowdown in the real estate market as we approach 2022.
Overall, three of the six indicators used in the report fell in the last month. Of the 1,003 heads of household surveyed, 76% said it was the right time to sell a house, but only 26% of those surveyed said it was the right time to buy-a record seen by the survey.
In addition, the number of respondents who thought their jobs were secure fell 2%, from 68% in November to 66% in December. Only 6% of respondents said their incomes were higher than 12 months ago, continuing a downward trend that started in September.
The survey also found that 44% of people expect home prices to increase in the next 12 months and 56% believe mortgage rates will increase in the next 12 months.
“The underlying constituents of the HPSI index have changed significantly over the past 12 months, especially both related to home buying and selling sentiment, and we’ve seen the index drift slightly lower since then. March 2021, an indication that the housing market could start to soften in the coming year, ”said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Over the past year, low mortgage rates and government stimulus packages have helped to increase demand for mortgages, but housing auctions have pushed prices up to record highs, making affordability a priority. greater stress for first-time homebuyers and those moving upwards. Among homeowners, “the right time to buy” sentiment has fallen by 30 percentage points over the past year to its current level of 30%; for tenants, it went from 37% to 21%. Even though demand remains strong, a majority of consumers clearly have reservations about buying a home at current prices. “
“We currently expect mortgage rates to continue to drift slightly higher until the end of the year, despite inflation concerns, which will likely exacerbate affordability concerns expressed by consumers in the market. HPSI, ”Duncan continued. Income relative to income levels also reinforce this concern, suggesting additional constraints on affordability. Combined with the results of our survey showing rising expectations for higher rent prices among consumers, we believe that some potential tenants may be looking to speed up their home buying timelines, which will help maintain strong growth (although that in deceleration) the growth of house prices. We anticipate an increase in the number of new homes on the market later in 2022, which should ease supply; however, this might not be enough to significantly affect home prices. As such, affordability is likely to be a growing challenge over the coming year.
The HPSI asks homeowners six key questions to determine a score: terms of purchase, terms of sale, home price outlook, mortgage rate outlook, job security issues, and income trends. of their household.
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