WASHINGTON—The Fannie Mae Home Purchase Sentiment Index (HPSI) increased in April to its highest level since May 2022, jumping 5.5 points to 66.8.
All six of the HPSI’s components increased month over month, most notably the component associated with consumers’ expectations of mortgage rates, Fannie Mae reported.
According to Fannie Mae, while the component remains negative on net – meaning more respondents than not expect mortgage rates to go up over the next year – in April, 22% of consumers indicated that they expect mortgage rates to go down, compared to only 12% last month. Affordability constraints continue to hinder overall homebuying sentiment, Fannie Mae added, with only 23% of respondents indicating it’s a good time to buy a home, although a plurality once again believe that home prices will increase over the next 12 months.
Year over year, the full index is down 1.7 points.
Expectation Rates Will Decline
“This month’s increase in the HPSI was the largest in over two years, primarily driven by consumers’ more optimistic mortgage rate expectations,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “An increased number of respondents indicated they think mortgage rates will go down over the next year, a belief that could be due to a combination of factors, including an awareness of decelerating inflation, market suggestions that monetary conditions will ease in the not-too-distant future, and, of course, actual mortgage rate declines during the month.
“However, the bump in optimism may prove to be temporary, as consumers continue to report uncertainty about the direction of home prices – and we know that high home prices remain the primary reason given by consumers who think it’s a bad time to buy a home,” continued Duncan. “Until affordability improves for a larger swath of the homebuying public, we believe home sales will remain subdued compared to previous years.”
Key Points
According to Fannie Mae, key findings in the HPSI include:
- Good/Bad Time to Buy. The percentage of respondents who say it is a good time to buy a home increased from 20% to 23%, while the percentage who say it is a bad time to buy decreased from 79% to 77%. As a result, the net share of those who say it is a good time to buy increased six 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 58% to 62%, while the percentage who say it’s a bad time to sell decreased from 40% to 38%. As a result, the net share of those who say it is a good time to sell increased five percentage points month over month, Fannie Mae said.
- Home Price Expectations. The percentage of respondents who say home prices will go up in the next 12 months increased from 32% to 37%, while the percentage who say home prices will go down increased from 31% to 32%. The share who think home prices will stay the same decreased from 35% to 31%. As a result, the net share of those who say home prices will go up increased five percentage points month over month, Fannie Mae reported.
- Mortgage Rate Expectations. The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 12% to 22%, while the percentage who expect mortgage rates to go up decreased from 51% to 47%. The share who think mortgage rates will stay the same decreased from 34% to 31%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased 13 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 increased from 78% to 79%, while the percentage who say they are concerned remained unchanged at 21%. As a result, the net share of those who say they are not concerned about losing their job increased one percentage point month over month, the HPSI stated.
- Household Income. The percentage of respondents who say their household income is significantly higher than it was 12 months ago increased from 20% to 24%, while the percentage who say their household income is significantly lower remained unchanged at 11%. The percentage who say their household income is about the same decreased from 68% to 64%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased four percentage points month over month.
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