Fannie Mae’s Home Purchase Sentiment Index (HPSI) Dropped in July - Supply and Demand
Home Purchase Sentiment Index®
Fannie Mae’s Home Purchase Sentiment Index® (HPSI) dropped 2.3 points to 74.2 in July. This is the first drop after two previous months of advances. However, the HPSI is still down 19.5 points Year-over-Year.
According to Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, this slight decline in the HPSI can be attributed to the rise of coronavirus cases across the U.S.
He states, “Following a partial recovery of the HPSI in the previous two months, consumer sentiment toward housing price took a slight step back in July amid a rise in coronavirus infections across many parts of the country, including the south and southwest. Supply of home constraints appear to be applying upward pressure to consumers’ home price expectations, which in turn has contributed to both a sharp reversal in optimism about whether it is a good time to buy a home and further improvement in home-selling sentiment.” (2)
Federal Reserve and Fed Interest Rates
This is unrelated to the Federal Reserve and Fed Interest Rates that were cut earlier this year. There are currently less homes on the market than there are buyers, which has made the seller’s market strength grow throughout the majority of the country.