Home buying sentiment rekindles in May, but concerns still abound
As coronavirus lockdowns begin to lift, consumer housing confidence shows signs of improvement after hitting a 10-year low, according to Fannie Mae.
After back-to-back record sentiment drops in March and April, the Fannie Mae Home Purchase Sentiment Index regained traction in May, climbing 4.5 points. The increase brought the index to 67.5 compared to readings of 63 the month before and 92 in May 2019.
"Although the HPSI’s precipitous declines of March and April did not continue in May, Americans' financial, economic and housing market concerns remain substantially elevated compared to survey history," Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a press release. "Low mortgage rates have helped cushion some of the impact of the pandemic on consumer sentiment regarding whether it’s a good time to buy a home, which picked back up this month to late-2018 levels."
Positive attitudes about current buying conditions overshadowed negative feelings by 13 percentage points. May's positivity share increased by 11 percentage points from April, though it's still 14 points below the year before.
The seller side has more room to improve. A 32% share of consumers thought May was a good time to sell a home. While that share rose 3 percentage points from the month prior, it stands 30 points lower than the percentage from the same time the year before.
Those surveyed still worry over the economy and employment.
"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," Duncan said. “Home-selling sentiment remains severely dampened due primarily to economic concerns, though increased purchase activity may improve the confidence of some potential sellers."
A net 51% of consumers expressed no concern of losing their job over the next 12 months, receding from 53% last month and 76% the year prior. Additionally, 18% reported significantly higher household income than in the past 12 months, compared to 20% in April and 21% in May 2019.
Overall sentiment could start shifting as more of the country reopens and people go back to work.
"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 re-engage in the economy," Duncan said.