Home selling confidence plummets in Fannie Mae survey

Attitudes on the health of the housing market and economy fell sharply in April as the effects of the COVID-19 pandemic grew more pronounced, according to the latest National Housing Survey from Fannie Mae.

The Home Purchase Sentiment Index, which is based on six factors from the survey, dropped 17.8 points to 63, the lowest reading since November 2011. The drop follows a decrease of 11.7 points in March and is down 25.3 points from previous year.

Respondents' pessimism was particularly notable in relation to home selling conditions. Just 29 percent said they thought it was a good time to sell a home, down 23 percentage points from March and 38 percentage points from April 2019. The share indicating that they thought it was a bad time to sell a home shot up from 24 percent in March 2019 and 36 percent in April to 65 percent.

Thirty-four percent said they think home prices will go down in the next 12 months, up from 22 percent in the previous month and 9 percent in the previous year. Twenty-three percent said they thought prices will increase, down 16 percentage points from March and 22 percentage points from April 2019.

On average, respondents said they think home prices will drop 2 percent in the next 12 months – the lowest expected growth rate in the survey's history. This figure was down from average expectations of a 0.7 percent increase in March and a 2.4 percent increase in April 2019.

Fewer respondents also considered it a good time to buy a home, although the effect was less pronounced than on the home selling side. Forty-eight percent thought it was a good time to buy a home, down 8 percentage points from March but a year-over-year drop of just 5 percentage points. Forty-six percent thought it was a bad time to buy a home, up 10 percentage points from March and 7 percentage points from April 2019.

Doug Duncan, senior vice president and chief economist at Fannie Mae, said factors such as increased job insecurity are making buyers more wary about a long-term commitment to a mortgage. At the same time, he said low mortgage rates may help make buyers more likely to consider a purchase.

"While consumers did grow more pessimistic in April about whether it's a good time to buy a home, low mortgage rates remain a driver of purchase optimism. We expect that the much steeper decline in selling sentiment relative to buying sentiment will soften downward pressure on home prices," said Duncan.

Twenty-three percent said they expect mortgage rates to drop in the next 12 months, up 3 percentage points from March and 17 percentage points from April 2019. Thirty-three percent said they think rates will increase, down 6 percentage points from the previous month and 13 percentage points from the previous year.

Fifty-five percent said they thought it would be easy for them to get a mortgage, down 1 percentage point from March but unchanged from April 2019. Forty percent said they thought it would be difficult to get a mortgage, down 2 percentage points from both the previous month and previous year.

Respondents were considerably less likely to expect home rental prices to increase, with 29 percent saying they think they will increase in the next 12 months – down from 52 percent in March and 61 percent in April 2019. Fourteen percent said they think rents will decrease, double the previous month's share and seven times higher than in April 2019. The average respondent said they thought rents would increase 1.7 percent, down from expectations of 3.5 percent in the previous month and 4.6 percent in the previous year.

Despite these expectations, respondents were no more likely to consider renting a home if they were to move. Sixty-five percent said they would buy their next home if they were to move, down 1 percentage point from March and 2 percentage points from April 2019. Twenty-nine percent said they would rent, unchanged from the previous year and down 1 percentage point from the previous month.

Unemployment concerns held steady, but were significantly higher than a year ago. Twenty-three percent said they were worried about potentially losing their job in the next 12 months, unchanged from the previous month but 10 percentage points higher than a year ago. Seventy-six percent said they were not worried about losing their job, down 1 percentage point from March and 11 percentage points from April 2019.

Twenty percent said their household income is significantly higher than it was 12 months ago, down from 27 percent in March and 32 percent in April 2019. Twenty-one percent said their income has fallen significantly, up 10 percentage points from the previous month and 11 percentage points from the previous year.

Forty percent said they think their personal financial situation will get better in the next 12 months, down 9 percentage points from the previous month and 11 percentage points from the previous year. Thirteen percent said they think their personal financial situation will get worse, up 1 percentage point from March and 5 percentage points from April 2019.

Thirty-four percent considered the U.S. economy to be on the right track, falling 10 percent from March and 27 percentage points from February; year-over-year, the share was down 18 percentage points. Fifty-three percent believed the economy was on the wrong track, up 9 percentage points from the previous month, 20 percentage points from two months earlier, and a year-over-year increase of 16 percentage points.

Fannie Mae's National Housing Survey is based on telephone interviews with a representative sample of approximately 1,000 Americans each month. Respondents are asked more than 100 questions to gauge attitudinal shifts in topics on the housing market and economy.

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