Home buying sentiment at five-month high as spring season begins

Home purchase sentiment is at its highest level since October due to three converging events: the spring buying season, increased vaccinations and stimulus checks being mailed out, Fannie Mae said.

March's Home Purchase Sentiment Index was at 81.7, an increase of 5.2 points from February's 76.2. In October 2020, the HPSI was also at 81.7. In March 2020, the index was 80.8, reflecting the start of the economic fallout from the pandemic, and it would bottom out one month later at 63.

"Home-selling sentiment experienced positive momentum across most consumer segments — nearly reaching pre-pandemic levels and generally indicative of a strong seller’s market," Fannie Mae Chief Economist Doug Duncan said in a press release. "Consumers once again cited high home prices and tight inventory as primary reasons why it's a good time to sell."

However, while there was an increase in the net percentage of those saying it was a good time to buy in March compared with February, that metric has not recovered to pre-pandemic levels. This is because "the home buying experience continues to prove difficult for many of the same reasons, namely high prices and a lack of supply," Duncan explained.

There was a five percentage point month-to-month increase in the share of consumers saying it was a good time to buy a home, to 53% from 48% in February, while those saying it was a bad time to buy fell to 40% from 43%.

Meanwhile, 61% of March respondents said it was now a good time to sell, up from 55% in February. The share that said it was a bad time to sell fell to 28% from 35% in February.

Of the six components Fannie Mae uses to calculate the HPSI, the only one to decline on a net basis, unsurprisingly, was consumers' outlook on mortgage rate movements over the next 12 months.

A mere 6% of respondents said they expected mortgage rates to move downward, with 54% stating they would go up and 34% believing they would remain flat. In February's survey, the percentages were 8%, 47% and 38% respectively.

As to that double-edged sword of rising home prices, 50% of those participating in the March survey said they would rise over the next 12 months, while 29% said they would remain the same and 14% responding they would decline.

In February, 47% expected prices to increase, 29% felt they would remain unchanged and 18% said they would drop.