Consumers Feeling Better About Finances, Jobs; Worse About Homebuying

Consumers Feeling Better About Finances, Jobs; Worse About Homebuying

High home prices and low supply driving real estate pessimism
Open house lawn sign

In its May Home Purchase Sentiment Index (HPSI), government-sponsored enterprise Fannie Mae, which helps provide mortgage financing and housing information, found that consumers aren’t optimistic about buying a home right now, despite feeling good about their jobs and financial situations.

According to the survey, consumers didn’t think it was a good time to buy a house, though they did say it was a good time to sell one. Even though they felt confident about their finances, they suggested that the high cost of homes and low supply makes it a difficult time to purchase.

Consumers say it’s a bad time to buy a home

For the second month in a row, consumers have felt pessimistic about the housing market. While over half (53%) said it was a good time to buy a home in March 2021, only 35% said so in May, further down from April’s 47%.

"[Consumers are] showing even greater pessimism about homebuying conditions compared to last month," said Doug Duncan, senior vice president and chief economist at Fannie Mae. With a nod to the survey’s record-low "‘good time to buy’ component," he assessed that "consumers appear to be acutely aware of higher home prices and the low supply of homes."

That said, the survey uncovered that consumers would like to buy a home, rather than rent one, the next time they move. Duncan attributed this to the increased savings that some people were able to achieve during the pandemic, as well as the historically low mortgage rates.

But those looking for a home might not want to wait too long, as about one in two respondents (49%) thought mortgage rates will increase in the next year — only 6% think they will go down.

2 out of 3 consumers say it’s a good time to sell

While prospective homebuyers aren’t feeling optimistic, home sellers seem to be in a better position. According to the HPSI, 67% of respondents said it’s a good time to sell, with only 25% saying they think it’s a bad time.

The number of consumers who think home prices will rise in the next year decreased slightly from 49% in April to 47% in May, which may explain why many think it’s a good time to sell and cash in on the hot market.

Financial situations, job security improving

While the COVID-19 pandemic created financial distress for many, some people seem to be doing better than they were a year ago. The percentage of consumers who said their household income was higher now than it was this time last year increased from 21% in April to 29% in May. The percentage of those who said their household income is lower than last year dropped from 17% to 13% between the two months.

Consumers are also feeling better about job security, with the number of people who said they’re not concerned about losing their job in the next 12 months increasing from 80% (April) to 87% (May). The percentage who are concerned decreased from 16% to 12%.

Overall, Americans are enjoying higher household incomes and greater job security than they were a year ago — still, it is notable that the number of people who said their income is higher is still less than one in three.

Methodology: Fannie Mae’s Home Purchase Sentiment Index (HPSI) converts consumer information taken from Fannie Mae's National Housing Survey (NHS) into a single number. For its National Housing Survey, Fannie Mae coordinated with research firm PSB to poll 1,003 respondents through live telephone interviews; respondents were asked more than 100 questions about their attitudes toward owning and renting a home, household finances and other related topics. The NHS for May 2021 was conducted between May 1 and May 25, 2021, with the majority of data collection occurring in the first two weeks of this time frame.