Home buying sentiment takes significant tumble in May

Fewer and fewer consumers found May’s home purchase conditions palatable given sky-high prices and sparse inventory.

After the segment of borrowers who thought it was a good time to buy dropped to a Fannie Mae Home Purchase Sentiment Index all-time low of 47% in April, it tumbled even further to 35% in May. A 56% share said May was a bad time to buy a home, dropping the net percentage to -21% from -1% in April and 13% a year ago. It represents only the second time in the survey’s 10-year history the buying sentiment skewed to a pessimistic majority.

Although consumers have clear awareness of the current buying challenges, they still want to get in on the advantageous interest rate environment before that changes.

NMN06072021-HPSI.png

“Consumers do appear more intent to purchase on their next move, a preference that may be supported by the expectation of continued low mortgage rates as well as the elevated savings rate during the pandemic, which may have allowed many to afford a down payment," Fannie Mae SVP and chief economist Doug Duncan said in the report.

Despite the major dropoff in those optimistic about buying a home, four of the index’s six components exhibited positive movements month-over-month, raising the overall home purchase sentiment score to 80 from 79 in April and 67.5 year-over-year.

Two-thirds of consumers said it was a good time to sell compared to 25% who said it wasn’t. The net positive 42% increased from 41% in April and from -30% in May 2020. As the economy keeps building momentum out of the pandemic’s recession, perspectives on employment and salary showed the most improvement. A 75% net share of respondents weren’t concerned about losing their jobs, up 11 percentage points monthly and 24 percentage points annually. Meanwhile a net 16% reported significantly higher household income in the past 12 months, up 12 points and 17 points from the month and year before, respectively.

A net 43% anticipate mortgage rate growth in the next year, down from 47% in April, but up from 0% a year earlier. Lastly, a net 30% of consumers expect home prices to rise in the next 12 months, a decline from 32% in April while rising from -9% the year before.

For reprint and licensing requests for this article, click here.
Purchase Mortgage rates forecast Housing inventory Housing markets Fannie Mae
MORE FROM NATIONAL MORTGAGE NEWS