Attitudes toward the housing market and economy showed some improvement in May after a sharp pessimistic turn caused by the coronavirus pandemic in previous months, according to the latest National Housing Survey by Fannie Mae. However, a majority of respondents continued to hold negative views about home selling and economic conditions.

The Home Purchase Sentiment Index tallied by the survey stood at 67.5, up 4.5 points from April – the first increase in two months. Compared to May 2019, the measure was down 24.5 points. The index is based on six factors from the survey, including whether respondents consider it a good time to buy or sell a home, expected changes to mortgage rates and home prices, job security, and changes in household income.

"Although weakened income perceptions and continuing job loss concerns, particularly among renters, are likely weighing on many would-be buyers, purchase mortgage applications have returned to mid-March levels when pandemic response measures began ramping up," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Home-selling sentiment remains severely dampened due primarily to economic concerns, though increased purchase activity may improve the confidence of some potential sellers. As lockdown restrictions begin to ease across the country, we expect economic recovery to be largely shaped by consumers' decisions regarding when and how to reengage in the economy."

Sixty-two percent considered it a bad time to sell a home, down 3 percentage points compared to the previous month but a year-over-year increase of 39 percentage points. Thirty-two percent thought it was a good time to sell a home; this share was up 3 percentage points from April, but down by more than half compared to May 2019, when 66 percent considered it a good time to sell.

Thirty-five percent said they expect home prices to drop in the next 12 months, up 1 percentage point from the previous month and 26 percentage points from the previous year. Twenty-six percent said they think home prices will increase, up 3 percentage points from April but down 24 percentage points from May 2019. The average respondent expected prices to drop 1.1 percent in the next 12 months; in April, the average expectation was a 2 percent decrease while in May 2019 the average respondent thought home prices would increase by 3.1 percent.

Respondents were less likely to believe that conditions were detrimental to buyers, with 52 percent believing it was a good time to purchase a home – up 4 percentage points from the previous month but down 8 percentage points from May 2019. Thirty-nine percent thought it was a bad time to buy, up 6 percentage points from the previous year but a monthly drop of 7 percentage points.

One in four respondents said they expect mortgage rates to decrease in the next 12 months, and the same share believe rates will increase. The share expecting a decrease was up 2 percentage points compared to the previous months and 19 percentage points compared to the previous year. The share expecting rates to climb was down 8 percentage points from April and 18 percentage points from May 2019.

Fifty-seven percent said they thought it would be easy for them to get a mortgage, up 2 percentage points from April but down 2 percentage points from May 2019. Thirty-seven percent said they thought it would be difficult to get a mortgage, down 3 percentage points from the previous month and 1 percentage point from the previous year.

Sixty-six percent said they would buy their next home if they were to move, up 1 percentage point from both the previous month and previous year. Twenty-eight percent said they would rent, down 1 percentage point from April and 3 percentage points from May 2019.

Thirty-four percent said they think home rental prices will increase in the next 12 months, up from 29 percent in the previous month but down from 65 percent in the previous year. Thirteen percent said they think rental prices will decrease, down 1 percentage point from April but up 10 percentage points from May 2019. The average respondent said they think rental prices will increase 2.1 percent in the next 12 months, up from 1.7 percent in the previous month but down from 5.4 percent in the previous year.

Heightened concerns about unemployment persisted, with 24 percent saying they were worried about possibly losing their job in the next 12 months – twice the share in May 2019 and up 1 percentage point from April. Seventy-five percent said they were not worried about losing their job, down 1 percentage point from the previous month and 13 percentage points from the previous year.

Nineteen percent said their household income is significantly lower than it was 12 months ago, dropping 2 percentage points from April but a year-over-year increase of 9 percentage points. Eighteen percent said their income is significantly higher, down 2 percentage points from April and 13 percentage points from May 2019.

Forty-one percent said they believe their personal financial situation will improve in the next 12 months, up 1 percentage point from the previous month but down 9 percentage points from the previous year. Fourteen percent said they believe their personal financial situation will worsen, up 1 percentage point from the previous month and 3 percentage points from the previous year.

Sixty percent said they consider the U.S. economy to be on the wrong track, up 7 percentage points from April and 26 percentage points from May 2019. Twenty-nine percent said they thought the economy was on the right track, down 5 percentage points from the previous month and 24 percentage points from the previous year.

The National Housing Survey is conducted each month and surveys approximately 1,000 American adults via telephone. Respondents are asked more than 100 questions to track changing perceptions on a variety of topics related to the housing market and economy.