Housing sentiment in the United States, as measured by the Fannie Mae Home Purchase Sentiment Index (HPSI), has fallen to its lowest level in more than 10 years.
An index of home price growth expectations also fell, but continues to remain in positive territory. According to Doug Duncan, Fannie Mae Senior vice president and chief economist, higher mortgage rates are taking a toll on housing affordability, thus resulting in the decline in the HPSI for much of the year.
Unfavorable mortgage rates were often cited by consumers as the “top reason” for the perception that it was a bad time to buy or sell a home, Duncan stated. Consumers are indicating that selling conditions are “softening.” Fannie Mae expects the current housing conditions to remain “increasingly mixed.”
“Some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential homebuyers may choose to postpone their purchase decision believing that home prices may drop,” Duncan said.
Taking Longer to SellThe changing market situation was reflected in a July 21 news release by real estate brokerage firm Redfin that showed that homes are taking longer to sell.
According to Ian Shepherdson, chief economist at Pantheon Macroeconomics, homebuilders are in denial about the “extent of the drop in demand,” even though mortgage applications have been falling significantly.
Data from the National Association of Home Builders/Wells Fargo Housing Market Index shows that the U.S. homebuilder confidence came in at 55 in July, a drop of 12 points on a monthly basis. This is the second largest drop in the index’s history.