The Fannie Mae Home Purchase Sentiment Index®(HPSI) increased 3.2 points in June to 72.6, rebounding from last month’s dip and returning the index nearer the plateau it set earlier this year, according to a recent report from fanniemae.com.
This month, 19% of consumers indicated that it’s a good time to buy a home, up from 14% in May, which had represented a new survey low, the report noted.
The share of consumers believing it’s a good time to sell also increased, said Fannie Mae, rising from 64% to 66%. Greater shares of consumers also indicated belief that home prices and mortgage rates would rise over the next 12 months, the agency added.
Among the household finance components, the percentage of consumers expressing a sense of job security jumped to 79%, an increase of 4 percentage points compared to May. The full index is up 6.6 points year over year, according to the Fannie Mae report.
Locally, the short-term outlook for the housing market looked slightly more positive as interest rates moderated throughout the month of June and the supply condition continued to improve in the past couple of months, said a recent report by the California Association of Realtors (CAR).
“Affordability concerns remain the primary driver of consumer housing sentiment, even as the topline findings from our monthly survey showed a modest uptick in optimism on both homebuying and home-selling conditions,” said Fannie Mae Vice President and Deputy Chief Economist Mark Palim.
“If mortgage rates decline through the end of the year, as we currently forecast, we do think home sales activity will pick up,” he continued, “but progress on that front is likely to be slow due to the ongoing imbalance between supply and demand. A significant majority of consumers continue to tell us that it’s a ‘bad time’ to buy a home, and they’re also telling us that they expect both home prices and mortgage rates to move higher over the next 12 months. Taken together, in our view, this leaves little upside to overall sentiment until meaningful progress is made on affordability – most likely in the form of either lower rates or improved supply.”
While the growth momentum could be cooling off for the U.S. economy, the housing market could benefit from the slowdown if the Federal Reserve reacts accordingly and starts reducing the policy rates in the near term, the Fannie Mae report added.
The CAR report also noted that, “While those who believed that mortgage rates will decline in the next 12 months dipped slightly from 25% in May to 24% in June, more consumers (79%) felt secured about their jobs last month than the month prior (74%), which could be a reason for the prop-up in homebuying optimism.”
The share of consumers who said that it is a good time to sell also increased, with a modest climb of two percentage points from 64% in May to 66% in June, said the CAR report.
The bounce back in home selling confidence will hopefully add more listings to the market and continue to alleviate the imbalance between supply and demand in coming months.
Housing supply has also been slowly improving in the first half of 2024 and the gradual diminishing lock-in effect could be a contributing factor to the increase in inventory, said CAR.
