After its third straight month of gains, Fannie Mae's Home Purchase Sentiment Index (HPSI) is now at 81.7, up 0.7 point from September. The October increase was the fifth in the six months since the Index, based on some components of the National Housing Survey, bottomed out at a pandemic generated nine year low of 63.0. The index is still down 7.1 points from its October 2019 level.
Three of the HPSI components increased in October. Questions on whether it is a good time to buy a home or to sell one both generated increased positive responses than in September. The percentage of respondents who say it is a good time to buy increased from 54 percent to 60 percent, while the percentage who say it is a bad time to buy decreased from 38 percent to 35 percent. As a result, the net share of Americans who say it is a good time to buy increased 9 percentage points month over month and is 4 points higher than a year ago.
The percentage of respondents who say it is a good time to sell a home increased from 56 percent to 59 percent, while the percentage who disagreed dipped from 38 percent to 35 percent, leaving the net at 24 percent, a 6 point increase from September but down 17 points on an annual basis.
The third component to gain ground was the question of interest rate changes. The percentage of respondents who expect mortgage rates to decline over the next 12 months was unchanged at 11 percent. The share who expect rates to rise decreased from 38 percent to 32 percent while 49 percent expect no change, a 5-point increase. As a result, the net share of Americans who say mortgage rates will go down over the next 12 months increased 6 percentage points month over month and is 4 points higher for the year.
The percentage of respondents who say home prices will go up in the next 12 months decreased this month from 41 percent to 40 percent, while the percentage who say home prices will go down increased from 17 percent to 20 percent. The share who think home prices will stay the same decreased from 34 percent to 31 percent. Thus, the net share of Americans who expect further appreciation decreased 4 percentage points month-over-month and 7 points from a year earlier.
While survey responses were generally positive about the housing market, consumers reported greater pessimism about their personal finances and employment. Confidence about job security has been a consistently strong feature over the history of the survey and Index. However, the percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 83 percent to 79 percent, while the percentage who say they are concerned increased from 16 percent to 21 percent. As a result, the net share of Americans who say they are not concerned about losing their job decreased 9 percentage points to 58, a 14-point annual decline.
There was also a downturn in the share of respondents who say their household income is significantly higher than it was 12 months ago. The net positive responses decreased from 59 percent in September to 55 percent. This put that component down 13 points year-over-year.
"In October, home purchase sentiment and personal finance sentiment diverged to produce only a slight increase in the HPSI," said Doug Duncan, Senior Vice President and Chief Economist. "Though there were improvements in the HPSI's buying, selling, and mortgage interest rate outlook components, we saw similar declines in the job security and household income change components. To date, the HPSI has recovered over 60 percent of its COVID-19 pandemic loss, reflecting the bright spot that the mortgage market has been in the economy. However, the continuing evolution of the pandemic and the 2020 election outcomes may have longer lasting and unexpected impacts on consumer sentiment, as we saw following the 2016 elections, and we expect both factors will shape the housing market over the coming months."
The National Housing Survey from which the HPSI is constructed, is conducted monthly by telephone among 1,000 consumers, both homeowners and renters. In addition to the six questions that are the framework of the index, respondents are asked questions about the economy, personal finances, attitudes about getting a mortgage, and questions to track attitudinal shifts.