Despite continued pessimism surrounding mortgage rates, home buyers and sellers are feeling a bit more confident in the housing market lately, according to recent data from Fannie Mae.
The latest Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased 0.9 points in March to 71.9, its first decline since November 2023. The slight decrease is mainly due to sentiment surrounding mortgage rates, as 34% of consumers now believe that mortgage rates will go up over the next 12 months, up from 32% last month.
Despite the jump in pessimism toward rates, Fannie Mae found that consumer perceptions of both home buying and selling conditions ticked up slightly again in March, and both measures have now risen multiple months in a row. Overall, though, the lack of housing affordability continues to weigh on consumers’ belief that it’s a “good time to buy” a home, with only 21 percent agreeing with that particular sentiment. The full index is up 10.6 points year over year.
“The HPSI remained relatively flat in March, but we’re seeing signs that consumers may be adjusting their expectations for the housing market to better accommodate the higher mortgage rate and home price environment,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “Both our ‘good time to buy’ and ‘good time to sell’ measures continued their slow upward drift this month. However, consumers took a slightly more pessimistic view on the likely direction of mortgage rates, likely reflecting the fact that actual mortgage rates have moved upward since the start of the year.”
Duncan continued, “With the historically low rates of the pandemic era now firmly behind us, some households appear to be moving past the hurdle of last year’s sharp jump in rates, an adjustment that we think could help further thaw the housing market. We noted in our latest monthly forecast that we expect to see a gradual increase in home listings and sales transactions in the coming year. We believe this will be driven not only by those coming off the sidelines due to a rate-related recalibration, but also by households who may need to move for other life reasons.”
Report highlights:
- Good/bad time to buy: The percentage of respondents who say it is a good time to buy a home increased from 19% to 21%, while the percentage who say it is a bad time to buy decreased from 81% to 79%. As a result, the net share of those who say it is a good time to buy increased 4 percentage points month over month.
- Good/bad time to sell: The percentage of respondents who say it is a good time to sell a home increased from 65% to 66%, while the percentage who say it’s a bad time to sell decreased from 35% to 34%. As a result, the net share of those who say it is a good time to sell increased 2 percentage points month over month.
- Home price expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 42% to 40%, while the percentage who say home prices will go down decreased from 23% to 20%. The share who think home prices will stay the same increased from 34% to 38%. As a result, the net share of those who say home prices will go up in the next 12 months increased 1 percentage points over month.
- Mortgage rate expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 35% to 29%, while the percentage who expect mortgage rates to go up increased from 32% to 34%. The share who think mortgage rates will stay the same increased from 32% to 36%. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased 8 percentage points month over month.
- Job loss concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 78% to 77%, while the percentage who say they are concerned increased from 22% to 23%. As a result, the net share of those who say they are not concerned about losing their job decreased 2 percentage points month over month.
- Household income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago remained unchanged at 19%, while the percentage who say their household income is significantly lower increased from 11% to 12%. The percentage who say their household income is about the same decreased from 70% to 68%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 2 percentage points month over month.
For the full report, click here.
