Despite some improvements in job security and household income, the Fannie Mae Home Purchase Sentiment Index (HPSI) showed only a slight change in October, indicating that consumer sentiment in the housing market remains grim. The HPSI, which measures the public’s perspective on home buying and selling, ticked up 0.4 points to 64.9 last month. However, the index was clouded by the belief of 78% of respondents that the economy is on the “wrong track,” with inflation cited as the main concern. Fannie Mae chief economist Doug Duncan noted that consumers expressed even greater pessimism toward the larger economy this month, in addition to their ongoing frustration with the housing market. Despite wage increases and a strong labor market, inflation has been a consistent factor in the public’s negative outlook since last year, impacting purchasing power.
According to Fannie’s news release, consumers across all income groups are feeling frustrated with the consistently high inflation rates since the end of last year. Despite a strong labor market and increased wages, many consumers feel that their purchasing power has not kept up with rising prices. This, along with high home prices and mortgage rates, is prolonging the affordability challenges for potential homebuyers. The HPSI components reveal that a record 85% of consumers believe it’s a “bad time” to buy a home due to high prices and mortgage rates. However, sentiment on selling homes remains steady, with 63% stating it’s a good time to sell. While expectations for home prices show a slight decline, prospects for mortgage rates have worsened slightly. On a positive note, job security sentiment has improved, and household income perspectives are slightly more positive, with 20% reporting a significant increase from the previous year.
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