While a plurality of homebuyers believes that it still isn’t the right time to pull the trigger on homebuying, new data from Fannie Mae shows increasingly positive attitudes towards purchasing a home, primarily due to the recent declines in mortgage rates.
The latest Home Purchase Sentiment Index (HPSI) report from Fannie Mae shows purchase sentiment at its highest level in more than two years, as consumers reported survey-high optimism that mortgage rates will decline over the next 12 months. However many potential homebuyers are still lying in wait due to price concerns.
“Although most consumers continue to think it’s a ‘bad time’ to buy a home, the recent shift in attitude toward mortgage rates is pushing overall housing sentiment higher, and a growing share are now pointing to high home prices rather than high mortgage rates as the primary sticking point for affordability,” said Mark Palim, Fannie Mae senior vice president and chief economist.
Palim added, “Notably, housing sentiment among renters, a common source of first-time homebuyers, has improved at approximately the same pace as homeowner(s). Over the last three months, the share of renters believing it’s a good time to buy a home has risen from 13% to 20%, while the share expecting mortgage rates to fall has risen from 16% to 30%. While these numbers are still relatively low, we think the improvement may signal that some potential homebuyers who have been waiting for mortgage rates to come down may be closer to coming off the sidelines, despite their ongoing concerns about home prices.”
Additional data show that things may be headed in a more buyer-positive direction. In September, a record 42% of consumers said they expect mortgage rates to decline, up from 39% the month prior and 24% in June, Fannie Mae reported. This compares to 31% who expect mortgage rates to stay the same and 27% who expect rates to increase.
But plenty of consumers aren’t quite on the same page as economists, who anticipate rates to continue falling. A zoomed out snapshot of the HPSI’s September data shows respondents’ perception of homebuying conditions ticked up only slightly this month and remains not far from its all-time low, with only 19% indicating it’s a good time to buy a home. On the flip side, 65% of consumers think it’s a good time to sell a home. The full index is up 9.4 points year over year.
What does this all mean for the market as a whole? An increase in home-buying activity may be on the horizon, but if the HPSI is any indicator, that activity will be tempered due to prices.
“Increased positivity that mortgage rates will continue to fall has driven the HPSI to a 30-month high, but we’ve yet to see consumers’ newfound rate optimism translate into a meaningful increase in home sales activity. Instead, as we noted in our latest housing forecast, existing-home sales are on pace to record their lowest annual total since 1995. This signals to us that consumers are paying attention to the easing interest rate environment but still feel stymied by the considerable run-up in home prices over the last four years,” said Palim.
Expressed as an index, the HPSI is on the rise, up 1.8 points in September to 73.9 overall.
