Consumer sentiment on housing market remains negative despite wage growth

The latest Fannie Mae Home Purchase Sentiment Index (HPSI) revealed a stagnant consumer sentiment in October, largely due to concerns about housing affordability and inflation. Despite improved job security and wage growth, a significant 78% of respondents believe the economy is on the “wrong track,” largely attributing this to inflation.

A record 85% of those surveyed indicated that it’s a “bad time” to buy a home due to high home prices and mortgage rates. This figure is up from 84% in the previous month. On the other hand, only 37% believe it’s a “bad time” to sell. The HPSI saw a slight increase in October to 64.9, up 8.2 points from last year.

Doug Duncan, Fannie Mae Senior Vice President and Chief Economist, pointed out that despite wage growth, 69% of consumers feel their incomes are ‘about the same’ as the previous year. This indicates that their purchasing power hasn’t kept pace with inflation, contributing to growing pessimism about the larger economy and housing market.

The index also showed that the percentage of respondents who say it’s a good time to buy a home dropped slightly from 16% to 15%. The HPSI is derived from Fannie Mae’s National Housing Survey (NHS), which assesses American adults’ attitudes towards homeownership, purchase and rental prices, household finances, and overall economic confidence.

Housing affordability has hit a 39-year low, with mortgage payments taking up more of buyers’ income. Payments on a median-priced home have escalated by 94% over two years to over $2,500 – a record high since 1975 as reported by Intercontinental Exchange (NYSE:) ICE.

Despite a minor decrease in 30-year fixed-rate mortgages from the 8% range, Mortgage News Daily states the current average rate for a 30-year mortgage as 7.48%. A further increase in mortgage rates is anticipated by 47% of respondents. Meanwhile, expectations for home price increases have slightly decreased to 40%.

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