Fannie Mae Home Purchase Sentiment Index

By: J. David Chapman/August 18, 2022

The Federal National Mortgage Association, commonly known as Fannie Mae, is a U.S. government-sponsored enterprise, and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the New Deal, the corporation’s purpose is to expand the secondary mortgage market by securing mortgage loans in the form of mortgage-backed securities.

Fannie Mae produces an indicator of consumers’ appetite for home purchasing called the Fannie Mae Home Purchase Sentiment Index. Consumer sentiment toward housing fell to the lowest levels seen since 2011 in the HPSI. The index dropped 2.0 points to 62.8 and is 13.0 points lower than the same time last year. The index measures buyer and seller sentiment and sentiment toward income.

Buyer confidence has eroded with rising home prices, increasing interest rates, and persistent inflation. Seller confidence had remained on a higher footing until the most recent couple of months and is now further contributing to a decline in overall purchase sentiment.

The share of survey respondents saying it is a bad time to buy outnumbered those saying it is a good time to buy more than 4-to-1. Again, this is evidence that homebuyers are still struggling with a large run-up in home prices, interest rates, inflation, and a limited inventory.

According to the survey, most consumers agree that the current housing market favors home sellers; however, seller sentiment is declining from its June 2021 peak. These findings align with changing consumer expectations around price growth, as the net share of Americans who believe home prices will go up over the next 12 months decreased by 8 percentage points compared to last month.

Respondents have a positive view of the current labor market, but the survey results reveal that this month’s reading was less optimistic than in recent months. In summary, consumers are still struggling with an affordability crunch as they juggle rising home prices, interest rates, and inflation outpacing income growth. While the housing market is showing signs of moderation through growing inventory, an increase in price reductions and slowing listing price growth, sellers have pulled back and are listing homes at lower rates than last year, which may slow the adjustment in the housing market that is already underway.

J. David Chapman is a professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).