The Fannie Mae Home Purchase Sentiment Index (HPSI) increased for the third consecutive month in January but still remains well below its pre-pandemic highs. Overall, the HPSI rose 0.6 points to 61.6, with three of the index’s six components increasing month-over-month, including those associated with home-selling conditions, home price outlook, and household income, Fannie Mae announced in a release.

Only 17 percent of respondents believe it’s a good time to buy, likely owing to the ongoing affordability challenges posed by elevated mortgage rates and home prices. Year-over-year, the full index is down 10.2 points.

“January’s HPSI results showed that consumer sentiment toward the housing market remains subdued by historical standards,” Doug Duncan, Fannie Mae senior vice president and chief economist, said in the release. “For consumers, the same affordability issues are persisting, as they continue to indicate that high home prices and high mortgage rates make it a ‘bad time to buy’ a home. The latest survey data also indicated that the majority of consumers expect home prices to decrease or remain flat over the next year, which may incentivize some potential homebuyers to delay their purchase decision.

“Although ‘good time to sell’ sentiment ticked upward this month, it’s still much lower than it was a year ago, as purchase affordability remains seriously constrained and mortgage demand has receded. Until we see improvements in affordability via lower home prices and mortgage rates, we expect home sales to remain muted in the coming months,” Duncan added.

As for a good/bad time to buy, Fannie said the percentage of respondents who say it is a good time to buy a home decreased from 21 percent to 17 percent, while the percentage who say it is a bad time to buy increased from 76 percent to 82 percent. As a result, the net share of those who say it is a good time to buy decreased 9 percentage points month-over-month.

The percentage of respondents who say it is a good time to sell a home increased from 51 percent to 59 percent, according to the HPSI, while the percentage who say it’s a bad time to sell decreased from 42 percent to 39 percent. As a result, the net share of those who say it is a good time to sell increased 11 percentage points month-over-month.

With regards to home price expectations, Fannie says the percentage of respondents who say home prices will go up in the next 12 months increased from 30 percent to 32 percent, while the percentage who say home prices will go down remained unchanged at 37 percent. The share who thinks home prices will stay the same increased from 29 percent to 30 percent. As a result, the net share of those who say home prices will go up increased 2 percentage points month-over-month.

“The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 14 percent to 13 percent, while the percentage who expect mortgage rates to go up increased from 51 percent to 52 percent,” Fannie Mae said. “The share who think mortgage rates will stay the same increased from 31 percent to 33 percent. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased 2 percentage points month-over-month.

“The percentage of respondents who say they are not concerned about losing their job in the next 12 months remained unchanged at 82 percent, while the percentage who say they are concerned increased from 17 percent to 18 percent,” The HPSI went on to conclude. “As a result, the net share of those who say they are not concerned about losing their job remained unchanged month-over-month. Note: Net share number remained unchanged due to rounding.”

On the topic of household income, the percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 25 percent to 22 percent, while the percentage who say their household income is significantly lower decreased from 15 percent to 10 percent. The percentage who says their household income is about the same increased from 59 percent to 67 percent. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased 2 percentage points month-over-month.