Only 35% now believe it’s a good time to buy, while 56% say it’s a bad time.
By Manuel Gutierrez, Consulting Economist to NKBA
Kitchen and bath remodeling is closely tied to the health of the housing markets, and that metric took a big hit last month.
Fannie Mae’s Home Purchase Sentiment Index (HPSI) measures consumers’ views on their financial situation, impact on the housing market, their opinions and attitudes toward house-buying and mortgages.
Two of the most pertinent questions for K&B are consumer opinions on buying or selling a house. For buying, the question revolves around whether they think now is a good time or bad time to purchase a home. The summary of those responses over the last two years is shown in Figure 1.
While the percentage who felt it was a good time to buy a remained in the 50%-to-60%+ range since at least May 2019, that number dropped significantly to just 35% in the latest survey.
Conversely, the percentage who think it’s a bad time rose to 56%.
Consumers who believe it’s a good time to buy a house plunged to 35% in May, after a year in the 50%-to-60%+ range.
The chart also displays (in red) the net difference between the “good time” and “bad time” percentages. It fell below zero for the first time in the survey’s short history, emphasizing the fact that a majority of consumers think it is a bad time.
For reference purposes, Figure 2 displays six key components used to calculate the index. Although there’s a sharp drop in consumer sentiment regarding a house purchase, they are more optimistic about their personal finances. There is a greater sense of job security, as 87% say they are not concerned about losing their job. This results in a net positive of 75%, shown in Figure 2.
Similarly, even though the majority (54%) say their income has not changed over the last year, a greater percentage (29%) indicate they have higher income today vs. lower (13%). This results in the net 16%.
The overall HPSI rose by one point in May to 80, which has brought it to the long-term average.
Figure 3 displays the monthly index since January last year. Understandably, it was significantly down in April and May 2020, as the initial pandemic shock took its toll. The index recovered in the following months, but briefly dropped this past December, a period right before wider availability of vaccines, when there was a surge of COVID-19 infections and deaths.
Turning toward broader, more traditional indicators of consumer views, the University of Michigan’s consumer sentiment index rose to 86.4 in June, up a healthy 3.5 points from the previous month’s reading. Meanwhile, the Conference Board’s consumer confidence index dropped by a minimal 0.3 points in May.
Charts:
