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Housing Sentiment Dips As Younger Consumers Grow Pessimistic About Homebuying Prospects

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Despite rising mortgage rates, the housing market remains hot. Heightened prices, low inventory and speedy turnarounds are predicted to continue in 2022.

So it’s not necessarily surprising that the latest Fannie Mae Home Purchase Sentiment Index (HPSI) shows a 2.4-point dip month over month and a 5.9-point drop year over year. To determine a composite score, Fannie Mae looks at six components — from buying and selling conditions to home price and mortgage rate outlooks.

As part of the overall score, 25% of consumers in January 2022 feel it’s a good time to buy a home, down from 26% in December 2021. Meanwhile, 70% of consumers think it’s a bad time to buy, up from 66% a month prior. Here’s what else can be gleaned from the January index.

Younger consumers increasingly downtrodden about homebuying conditions

Younger consumers, in particular, are expressing pessimism about current homebuying conditions. Only 15% of consumers ages 18 to 34 think it’s a good time to buy, while 83% feel it’s a bad time to buy — further widening the gap between the two.

This increasing pessimism could be chalked up to most consumers thinking mortgage rates will increase in the next 12 months, with a month-over-month increase from 56% to 58%. The percentage of respondents who think mortgage rates will decrease in that period remains unchanged at 4%, while those who believe rates will stay the same dipped from 30% to 28%.

Mortgage rate expectations in the next 12 months

December 2021January 2022
Rates will increase56%58%
Rates will decrease4%4%
Rates will stay the same30%28%

Consumers increasingly feel that home prices will remain the same in the next 12 months, increasing from 30% in December 2021 to 35% in January 2022. There was a slight dip among consumers who feel home prices will increase in the next 12 months, from 44% to 43%. Meanwhile, the percentage of respondents who think price tags will decrease dipped from 19% to 14%.

Home price expectations in the next 12 months

December 2021January 2022
Prices will increase44%43%
Prices will decrease19%14%
Prices will stay the same30%35%

Independent of the overall index, Fannie Mae tracks various key indicators monthly, including the percentage of consumers who say they would buy if they were going to move. This figure remained unchanged in January 2022 at 66%. Meanwhile, 28% say they would rent, down from 29% a month prior.

Americans still feel U.S. economy is on wrong track

A high proportion of consumers feel the economy is headed in the wrong direction, up to 66% in January 2022 from 65% in December 2021. Meanwhile, 24% of consumers think the U.S. economy is on the right track, down from 26% a month prior.

Is the U.S. economy on the right track or wrong track?

December 2021January 2022
Wrong track65%66%
Right track26%24%

A smaller proportion — 38% — say they think their money situation will improve in the next year, down from 43% in December. And 20% feel their finances will worsen, improving from 22% the month prior.

How financial situations will change over the next 12 months

December 2021January 2022
Better in 12 months43%38%
Worse in 12 months22%20%
Stay the same in 12 months34%41%

You should also make sure to do your homework on mortgage rates ahead of time, using a home loan calculator to help for an easier-going process.

Methodology: The Home Purchase Sentiment Index (HPSI) uses the Fannie Mae National Housing Survey data to provide a single sentiment figure. This survey is conducted by phone and includes about 1,000 American consumers each month. Respondents are asked more than 100 questions related to various housing topics: renting and homeownership, shifts in home and rental price changes, household finances, homeownership distress, the economy and consumer confidence.


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