What is the impact of the Fed rate hike on home purchase sentiment?

Consumers’ negative perceptions of the housing market continued through February, with Fannie Mae’s February Home Purchase Sentiment Index (HPSI) down to its lowest level in 19 months.

Fannie Mae’s latest report showed that a survey-record share of consumers, particularly homeowners and higher-income individuals, anticipate mortgage rates to increase in the next 12 months, likely a result of the Fed’s announcement that it will raise rates this March. Nonetheless, the full index was up by 3.5 points to 75.3 in February, though it remained down by 1.2 points from last year.

“High home prices continue to be the most commonly cited reason by consumers for their belief that it’s a good time to sell (and a bad time to buy) a home; notably, the ‘good time to buy’ sentiment among renters dropped to a new survey low,” said Fannie Mae chief economist Doug Duncan. “This suggests that homeowners and higher-income groups may recognize the importance of getting ahead of the rising rate environment, while renters are keenly feeling the double constraint on home purchase affordability of rising house prices and rising interest rates.”