Homebuyers are feeling the strain of a seller’s market, as indicated by the decline in the Home Purchase Sentiment Index from Fannie Mae. The index fell by over two points in July, as consumers reported feeling more pessimistic about buying a home, while optimism around selling increased.
The July index fell to 74.3, down from 76.5 the prior month, and 93.7 last year.
“Following a partial recovery of the HPSI in the previous two months, consumer sentiment toward housing took a slight step back in July amid a rise in coronavirus infections across many parts of the country, including the south and southwest,” Doug Duncan, senior vice president and chief economist at Fannie Mae, said. “Supply constraints appear to be applying upward pressure to consumers’ home price expectations, which in turn has contributed to both a sharp reversal in optimism about whether it is a good time to buy a home and further improvement in home-selling sentiment.”
Duncan noted that the July survey was conducted at the same time that legislators were considering provisions in the CARES Act that would offer relief to homeowners whose incomes were strained by the pandemic.
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“Not surprisingly – more than any other respondent groups – renters, 18-to-34-year olds, and households earning less than $100,000 think it’s a bad time to buy a home, which we believe suggests a less favorable outlook for first-time homebuying activity. In the months ahead, we continue to expect consumer sentiment to be closely linked to the country’s progress in containing the spread of the virus.”
One of the components of the index is consumers’ expectations around mortgage rates. The survey found 35% of respondents expect rates to increase in the next 12 months