The sentiment between homebuyers and sellers continues to diverge, although Fannie Mae's Home Purchase Sentiment Index rose 0.6 points in May. According to Fannie Mae, the index came in at 92.3, which is an all-time high for the second month in a row. But with home prices increasing, the difference in attitude between buyers and sellers is widening.
Fannie Mae found that the share of respondents who think it's a good time to sell increased to 46% in May and is up 14 percentage points on a year-over-year basis. The share of survey respondents who said it's a good time to buy a home dipped to 28%, showing little improvement on a year-over-year basis. The net share of consumers who think home prices will increase in the next year remained unchanged at 49%, while the net share of survey respondents who think mortgage rates will decrease during the next 12 months fell 1 percentage point.
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The spring real estate market has been a tale of the haves and have-nots. Sellers in sought-after neighborhoods are seeing property values rise and bidding wars break out. Buyers, faced with rising mortgage rates and increasing property values, are finding it hard to purchase a new home. That is particularly true of first-time homebuyers, who tend to be price sensitive. At the same time, Fannie Mae said the share of consumers who think their financial situation will improve in the next year declined 6 percentage points to 48%. Those who expect their financial situation to remain the same increased 6 percentage points to 40%.
"The HPSI edged up to another survey high in May, bolstered in part by a fresh record high in the net share of consumers who say it's a good time to sell a home. However, the perception of high home prices that underlies this optimism cuts both ways, boosting not only the good-time-to-sell sentiment but also the view that it's a bad time to buy, and presenting a potential dilemma for repeat buyers," said Doug Duncan, senior vice president and chief economist at Fannie Mae, in a press release announcing the results of the index last week.
For existing homeowners, the rise in property value has pushed up their equity and reduced the number of mortgages that are underwater, or worth more than the value of the house. Last week, CoreLogic released its Home Equity Report for the first quarter of 2018, which showed that equity increased 13.3% from a year ago, representing a $1.01 trillion gain since the first quarter of last year. What's more, CoreLogic found that the average homeowner gained $16,300 in home equity from the first quarter of last year to the first quarter of 2018. Negative equity, CoreLogic noted, peaked at 26% of mortgaged homes in the fourth quarter of 2009. As of the end of the first quarter of 2018, total negative equity was around $284.8 billion, which is up by around $100 million from the fourth quarter.