More Consumers Expect Mortgage Rates and Home Prices to Rise Even Further

67% of Respondents Expect Mortgage Rates to Increase in Next 12 Months, a New Survey High

News provided by

Mar 07, 2022, 08:30 ET

WASHINGTON, March 7, 2022 /PRNewswire/ -- The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index^® (HPSI) increased by 3.5 points to 75.3 in February, but affordability constraints continue to drive consumers' perception of the housing market. Overall, five of the index's six components increased month over month, including the components measuring consumers' perceptions of homebuying and home-selling conditions. However, on net, the 'Good Time to Buy" component remains near its recently established record low, as survey respondents continue to cite high home prices as the primary impediment to purchasing. Consumers did report a substantially improved sense of job security, but a much greater share indicated that they expect mortgage rates to move even higher. Year over year, the full index is down 1.2 points.

"A survey-record share of consumers – particularly homeowners and higher-income individuals – expect mortgage rates to increase in the next 12 months, likely owing to signals that the Fed will raise rates to slow the pace of inflation," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. "High home prices continue to be the most commonly cited reason by consumers for their belief that it's a good time to sell (and a bad time to buy) a home; notably, the 'good time to buy' sentiment among renters dropped to a new survey low. This suggests that homeowners and higher-income groups may recognize the importance of getting ahead of the rising rate environment, while renters are keenly feeling the double constraint on home purchase affordability of rising house prices and rising interest rates."

Duncan continued: "Nonetheless, the HPSI increased moderately in February, though the index still remains slightly lower on a year-over-year basis. Continued negative perceptions around homebuying conditions were offset in part this month by consumers' increased sense of job security, which we believe is likely due to labor market tightness and declining COVID case counts. However, with recent geopolitical events creating additional economic uncertainty – including likely increasing inflationary pressure – we believe the additional headwinds will compound existing affordability constraints to further soften mortgage demand in the coming year. It's worth noting that this month's National Housing Survey^® was conducted between February 1 and February 22, prior to the Russian invasion of Ukraine."

Home Purchase Sentiment Index – Component Highlights

Fannie Mae's Home Purchase Sentiment Index (HPSI) increased in February by 3.5 points to 75.3. The HPSI is down 1.2 points compared to the same time last year. Read the full research report for additional information.

Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home increased from 25% to 29%, while the percentage who say it is a bad time to buy decreased from 70% to 67%. As a result, the net share of those who say it is a good time to buy increased 7 percentage points month over month.
Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home increased from 69% to 72%, while the percentage who say it's a bad time to sell remained unchanged at 22%. As a result, the net share of those who say it is a good time to sell increased 3 percentage points month over month.
Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months increased from 43% to 46%, while the percentage who say home prices will go down increased from 14% to 16%. The share who think home prices will stay the same decreased from 35% to 32%. As a result, the net share of Americans who say home prices will go up increased 1 percentage point month over month.
Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 4% to 3%, while the percentage who expect mortgage rates to go up increased from 58% to 67%. The share who think mortgage rates will stay the same decreased from 28% to 22%. As a result, the net share of Americans who say mortgage rates will go down over the next 12 months decreased 10 percentage points month over month.
Job Concerns: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 78% to 87%, while the percentage who say they are concerned decreased from 17% to 9%. As a result, the net share of Americans who say they are not concerned about losing their job increased 17 percentage points month over month.
Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago increased from 26% to 27%, while the percentage who say their household income is significantly lower decreased from 14% to 12%. The percentage who say their household income is about the same remained unchanged at 56%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased 3 percentage points month over month.

About Fannie Mae's Home Purchase Sentiment Index
The Home Purchase Sentiment Index® (HPSI) distills information about consumers' home purchase sentiment from Fannie Mae's National Housing Survey® (NHS) into a single number. The HPSI reflects consumers' current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers' evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

About Fannie Mae's National Housing Survey
The most detailed consumer attitudinal survey of its kind, Fannie Mae's National Housing Survey (NHS) polled approximately 1,000 respondents via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). For more information, please see the Technical Notes. Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to support the housing market. The February 2022 National Housing Survey was conducted between February 1, 2022 and February 22, 2022. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by PSB, in coordination with Fannie Mae.

Detailed HPSI & NHS Findings
For detailed findings from the Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results.

To receive e-mail updates with other housing market research from Fannie Mae's Economic & Strategic Research Group, please click here.

About Fannie Mae
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:

Fannie Mae Newsroom
https://www.fanniemae.com/news

Photo of Fannie Mae
https://www.fanniemae.com/resources/img/about-fm/fm-building.tif

Fannie Mae Resource Center
1-800-2FANNIE

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

SOURCE Fannie Mae