How the HPSI Gives Insight into Buyer Behavior

The Home Purchase Sentiment Index (HPSI) summarizes data from the National Housing Survey on consumers, conditions, attitudes, and intentions about housing. The HPSI shows promise both as a stand-alone indicator and as a supplement for evaluating and forecasting housing and mortgage markets. It has become an excellent indication of the housing market conditions to forecast the near future. The number one question among consumers, agents, and service providers alike pertain to how long the present market demand will last. With interest rate hikes officially underway, it’s an opportune time to understand one of the many indicators.

Why is sentiment important?

Something that came in the wake of the financial crisis of 2008 was the realization that many market indicators, including housing, were too financially focused. Because the financial market doesn’t always correlate to the buyer behaviors of the American people, an index that measures sentiment can be extremely valuable. The sentiment is even more critical in markets that involve long-term commitments. These surveys, while objective, can provide a good indication as to how people are reacting to market shifts.

How is it calculated?

The survey itself is a simple six questions for consumers that help to determine home purchase or home selling decisions. These questions include if conditions are good for buying or selling a home, where consumers feel prices are moving, if they are concerned about their working conditions which would change their economic status, and what adjustments to income they might experience.

What does it say?

The sentiment of buyers remains much lower than that of sellers indicating that the seller market will continue. Seller sentiment year over year has increased substantially whereas buyer sentiment has continued to decline. Nearly half of respondents are expecting home prices to continue to rise and mortgage rates to continue to increase. While the concern for job loss is nearing an all-time low, the survey indicates that there will be minimal increases in salary expectations.



Aggregate

The overall index when calculated as a unit has gone slightly higher the first quarter of the year. This means that, according to consumer behavior, the market will remain active despite the pending interest rate adjustments. Fannie Mae reports that another growing factor is the geopolitical climate which could create an additional area of sentiment concern in the coming months but has yet to become obvious in this survey.


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