Bulletin Board Magazine 2022 Volume 2

Market Update

Home Purchase Sentiment Stable BUT REMAINS LOW Danielle Hale and Sabrina Speianu, Realtor.com

C onsumer sentiment toward housing remained relatively stable in May, but is near lows not seen since the start of the COVID 19 pandemic, as measured by the Fannie Mae Home Purchase Sentiment Index (HPSI). The index dropped 0.3 points to 68.2 and is 11.8 points lower than the same time last year. Previously, consumer sentiment toward housing hit a low of 63.0 in April 2020 as uncertainty about what the pandemic would mean for housing markets and the economy weighed on the outlook. More recently, buyer confidence has been impacted by rising home prices, increasing interest rates, and inflation. While both seller confidence and the inventory of homes for sale have improved, the number of homes for sale still remains 48.5% below early pandemic levels in May 2020.

Homebuying Sentiment Continues to Decline The share of survey respondents saying it is a bad time to buy outnumbered those saying it is a good time to buy almost five-to-one, leading to the largest net bad time to buy response recorded since 2010 (-62%). Homebuyers have been facing a large run-up in home prices, interest rates, and inflation, as well as limited inventory of homes for sale, for several months now. While recent Realtor.com housing data shows that the number of homes actively for sale has finally increased compared to last year (+8.0% year-over-year in May–the first such increase in 3 years) , an increase in inventory won’t immediately boost homebuyer confidence as overall levels still remain low and affordability challenges persist. However, the increase in inventory may ultimately help moderate the double-digit home price growth we’ve seen for many months now.

The HPSI survey reveals that the net share of Americans who believe home prices will go up over the next 12 months increased by another 5 percentage points compared to last month. Additionally, the net share of respondents who think mortgage rates will go down within the next 12 months also increased slightly by two percentage points. While declining rates would be good for long-term housing demand, if consumers believe they will go down in the future, they may delay purchases now, further moderating short-term housing demand. That said, while the net share expecting rates to go down increased, the vast majority (70%) still believes rates will go up. This means that mortgage rate expectations are more likely to be a boost to near-term housing demand as opposed to a drag.

Bulletin Board | 31 | www.shorebuilders.org