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Why Are Home Sellers Wary of Trading Up?

08.08.2018

The upward movement of home prices has made both home sellers and buyers wary about selling or purchasing a home. This, according to the findings of the Fannie Mae Home Purchase Sentiment Index (HPSI), released on Tuesday.

The HPSI fell in July for the second consecutive month, dropping 4.2 points to 86.5 in July after reaching survey highs in April and May.

Fannie Mae attributed this drop to declines in four of the six HPSI components—those who said it was a good time to buy a home; those who said it was a good time to sell; those who said that home prices would go up; and those who said that they were not concerned about losing their job.

According to the survey, the net share of respondents who said that now was a good time to buy a home fell 4 percentage points from June to 24 percent. Those who said it was a good time to sell, also declined 6 percentage points from June's survey high to 41 percent.

“Home purchase sentiment seems to have reached a plateau, with potential home sellers likely struggling to find a home to buy amid slow supply growth, expectations for rising mortgage rates, and significant home price increases,” said Doug Duncan, SVP and Chief Economist at Fannie Mae.

In fact, high home prices were cited as the top reason for being a good time to sell a home, but a bad time to buy one, and according to Duncan could also be a factor in the low existing home sales seen during the season.

“This suggests a contributing factor to the low supply of existing homes for sale is that current owners are reluctant to trade up in a rising price market. Additionally, the shares of consumers citing favorable mortgage rates as a reason why it’s a good time to buy or sell a home both dropped to fresh survey lows.”

The survey revealed that the net share of Americans who said mortgage rates would go down over the next 12 months rose 1 percentage point to -52 percent, while the net share of those who said they were not concerned about losing their job fell 11 percentage points to 65 percent.

Read about the survey's findings in June:

Has Homebuyer Demand Plateaued?

by Radhika Ojha (via www.themreport.com)

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