The latest report from Fannie Mae’s Home Buying Sentiment Index (HPSI) showed a slight rebound showing that homebuyers are a little more optimistic this year about buying a home.
According to the analysis, the HPSI increased 3.7 points in December to 61.0, but the index remains only slightly above its record low set in October. The HPSI is down 13.2 points compared to the same period last year.
“In December, the HPSI rose slightly as consumers reported higher expectations that mortgage rates and home prices could decline over the next year, perhaps reflecting recent declines in mortgage rates and home prices. average home,” said Doug Duncan, a senior vice president at Fannie Mae.
“However, the HPSI remains very low by historical standards, particularly the ‘good time to buy’ component, and respondents continue to cite high home prices and unfavorable mortgage rates as the main reasons for their pessimism” Duncan added.
Fannie Mae notes that as we head into 2023, affordability is expected to remain the number one challenge for prospective homebuyers, as even small drops in home rates and prices, from a buyer’s perspective, they may not generate enough purchasing power.
The report indicates that three of the six components of the index improved month-over-month, including those related to home buying conditions, the outlook for mortgage rates and job security, while only 21% of respondents believe it is a good time to buy, likely due to continued affordability challenges posed by high mortgage rates and home prices. Year over year, the entire index is down 13.2 points.
The percentage of respondents who say it is a good time to buy a home increased from 16% to 21%, while the percentage who say it is a bad time to buy decreased from 79% to 76%.
The percentage of respondents who say it is a good time to sell a home decreased from 54% to 51%, while the percentage who say it is a bad time to sell increased from 39% to 42%.
Respondents who say house prices will go up in the next 12 months remained unchanged at 30%, while the percentage saying house prices will go down rose from 34% to 37%.
For those who say mortgage rates will drop in the next 12 months, the percentage increased from 10% to 14%, while the percentage expecting mortgage rates to rise decreased from 62% to 51%. The share who think mortgage rates will stay the same increased from 24% to 31%.
The percentage of respondents who say they are not worried about losing their job in the next 12 months increased from 78% to 82%, while the percentage who say they are worried decreased from 21% to 17%.
Finally, the percentage of respondents who say their household income is significantly higher than 12 months ago decreased from 27% to 25%, while the percentage who say their household income is significantly lower decreased from 17% to 15%.
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