Consumer Sentiment on Housing Market Remains Negative Despite Wage Growth

The latest Home Purchase Sentiment Index (HPSI) from Fannie Mae indicates that consumer sentiment remained stagnant in October, primarily influenced by worries surrounding housing affordability and inflation. Despite improvements in job security and wage increases, a notable 78% of participants feel that the economy is heading in the "wrong direction," with inflation being the main concern.

A record high of 85% of those surveyed believe it is a "bad time" to purchase a home, citing elevated home prices and mortgage rates. This figure marks an increase from 84% in the prior month. Conversely, only 37% think it is a "bad time" to sell. The HPSI experienced a slight rise in October to 64.9, reflecting an increase of 8.2 points compared to last year.

Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, noted that despite wage growth, 69% of consumers report that their incomes are "about the same" as the previous year. This suggests that purchasing power has not kept up with inflation, which contributes to increasing pessimism about the broader economy and the housing market.

Additionally, the index revealed a small decrease in the percentage of respondents who believe it is a good time to buy a home, dropping from 16% to 15%. The HPSI is calculated from Fannie Mae’s National Housing Survey (NHS), which gauges American adults’ perspectives on homeownership, real estate prices, household finances, and overall economic confidence.

Housing affordability has reached a 39-year low, with mortgage payments consuming a larger portion of buyers’ incomes. Payments for a median-priced home have surged by 94% over the last two years, exceeding $2,500, which is the highest level since 1975.

Despite a slight decline in 30-year fixed mortgage rates from the 8% range, the current average rate stands at 7.48%. Additionally, 47% of respondents anticipate further increases in mortgage rates, while expectations for home price growth have decreased slightly to 40%.

This article was generated with the support of AI and reviewed by an editor.