October 9, 2023, 10:33 am By 

Elevated mortgage rates continue to dampen already-pessimistic consumer housing sentiment and create affordability woes for both homebuyers and sellers.

That feeling is underscored in Fannie Mae’s latest Home Price Sentiment Index (HPSI), which decreased by 2.4 points in September to 64.5. The index tracks the housing market and consumer confidence to sell or buy a home.

A total of five of the HPSI’s six components dropped month over month, including those that measure perceived home-buying and home-selling conditions. Overall, the full index is up 3.7 points year over year.

“Mortgage rates persistently over 7% appear to be deepening the malaise consumers feel about the home purchase market,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist.

Only 17% of consumers indicated that they expect mortgage rates to go down over the next 12 months while 46% of consumers think rates will go up.

Persistently high mortgage rates surpassed high home prices as the top reason why consumers think it’s a bad time to buy a home – a survey first, Duncan said.

In September, 16% of consumers reported that it was a good time to buy a home, matching the all-time survey low set last year.

The share of consumers expressing pessimism about home-buying conditions hit a new survey high in September, with 84% now indicating that it’s a bad time to buy a home. 

Duncan noted that respondents also listed unfavorable mortgage rates on the sell side as the top reason why they believe it’s a bad time to sell a home.

About 63% said it was a good time to sell a home, down 3 percentage points compared to the prior month.

“This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon, but it also may reflect the worry of some homeowners that sale values might be suppressed slightly if the pool of qualified homebuyers is constrained by elevated mortgage rates,” Duncan said. 

The percentage of respondents who said they were concerned about losing their job in the next 12 months increased to 23%, up slightly from 22%. About 13% of consumers said their household income is significantly lower than it was a year ago. 

“Consumers are also not seeing much affordability relief in sight, as they continue to expect home prices to increase in the next 12 months,” Duncan said. “They also indicated that their personal economic situations are showing signs of strain, including lower year-over-year household incomes and a reduced sense of job security.”

He added, “In our view, all of this points to home purchase affordability remaining a problem for the foreseeable future, which we forecast will keep home sales sluggish into next year,” Duncan said.