Home Buyers and Sellers Souring on the Real Estate Market

Consumer sentiment is the lowest it has been since November 2011
An empty family room

With the coronavirus pandemic leading to an increase in economic anxiety among consumers, some are finding the housing market to be a gamble they are less willing to take.

The Fannie Mae Home Purchase Sentiment Index (HPSI), an indicator that measures how favorable it is at a given time to buy or sell a house, fell 17.8 points in April, from 80.8 to 63. This is the lowest it has been since November 2011. The monthly index tracks consumers’ responses to questions about the housing market, their job outlook, and changes to their household income.

Buyers and sellers on the same page

Homebuyers’ and sellers’ perceptions of the same housing market can often diverge. Sellers might find a market with high home prices to be favorable because they may be able to get more money for their property. At the same time, buyers might find that same market undesirable because they will have to shell out more cash for a house.

In the midst of the pandemic, however, the housing market is raising concerns among both home buyers and sellers.

According to the HPSI, the percentage of consumers who believe this is a good time to buy a house dropped from 56% in March to 48% in April. At the same time, the percentage who believe this is a bad time to buy a house increased from 36% in March to 46% in April.

When it comes to sellers, only 29% said this was a good time to sell a house, a sharp decline from 52% in March. Within the same period of time, the percentage of sellers who believe this is a bad time to sell dramatically increased from 36% to 65%.

Multiple factors at play when it comes to housing market outlook

A number of factors could be contributing to consumers’ growing pessimism around the housing market. The percentage of consumers who believe home prices will rise in the next 12 months dropped from 39% in March to 23% in April. On top of that, the percentage of respondents who believe home prices will drop over the next year increased from 22% in March to 34% in April. Sellers who believe home prices will fall in the near future may decide to put off selling until prices begin to tick up again.

While falling home prices might be good news for homebuyers, other factors may cause some buyers to hold off for now. Some consumers are experiencing reductions in income. Not only are workers experiencing job losses, but in some cases, bonuses and merit pay increases are being delayed or canceled. In fact, according to the HPSI, 21% said their household income was significantly lower in April than it was 12 months before. Only 11% reported this to be the case in March. On the flip side, the percentage in April who said their household income was significantly higher than it was 12 months before was 20%, down from 27% in March.

There were some glimmers of good news in the index for those interested in buying or selling this year, though. In April, 23% of respondents said they believe mortgage rates will go down in the next 12 months, slightly up from 20% in March. Also, the percentage of respondents who believe mortgage rates will rise dropped month over month from 39% to 33%.

Though economic anxiety is currently running high, it also seems that most consumers feel relatively secure about their jobs. Of those polled, 76% said they were not concerned about losing their job in the next 12 months.

Methodology: The HPSI is compiled using data from Fannie Mae’s National Housing Survey (NHS), a poll of 1,006 adults who are the financial decision-makers in their households. The April survey was conducted April 2-22.

Tamara E. Holmes

Tamara E. Holmes is a Washington, DC-based writer who covers personal finance, entrepreneurship and careers.