Decrease In Purchase Sentiment Index Driven By Job Security And Home-Selling Concerns

Mortgage News March 21, 2023

Fannie Mae’s Home Purchase Sentiment Index (HPSI) declined by 3.6 points in February to 58.0, indicating that both homebuyers and sellers are being cautious due to current market conditions. This comes after three consecutive monthly increases in the index. The HPSI tracks the housing market and consumer confidence to buy or sell a home.

The decrease was mainly driven by a substantial drop in consumers’ sense of home-selling conditions. Most respondents who indicated that it was a “bad time to sell” cited unfavorable economic conditions and mortgage rates as the primary reasons for their belief. Four out of the HPSI’s six components decreased month over month, particularly those associated with job security and home-selling conditions.

The percentage of respondents who believed it was a good time to sell a home decreased to 54% from 59% the previous month, while the percentage who believed it was not a good time to sell increased to 44% from 39%. The number of respondents concerned about losing their job increased to 24% from 18% the previous month.

According to Doug Duncan, senior vice president and chief economist at Fannie Mae, the results of the HPSI corroborate their expectation for subdued home sales in the coming quarters, particularly now that mortgage rates have begun rising again. The National Association of Realtors (NAR) reported that existing home sales have declined for one full year as of January. The seasonally adjusted sales pace for existing homes in January dropped 0.7% from the previous month to a pace of 4 million, marking the lowest level of home sales activity since May 2020.

The Mortgage Bankers Association expects total existing home sales to decline to 4.3 million in 2023 from last year’s 5.1 million, and new home sales to drop to 615,000 from the previous year’s 643,000. Duncan said that the increase in job security concerns seen in this month’s survey will be closely monitored since labor market uncertainty could play a factor in slowing housing activity.

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