WASHINGTON—The Fannie Mae Home Purchase Sentiment Index (HPSI) increased 3.5 points in January to 70.7, its highest level since March 2022, due primarily to increased consumer confidence in job security and another significant jump in the share of consumers expecting mortgage rates to decrease, Fannie Mae reported.
According to Fannie Mae, in January, 82% of consumers said they are not concerned about losing their job in the next 12 months, up from 75% last month. Additionally, an all-time survey-high 36% of respondents indicated that they expect mortgage rates to go down in the next 12 months, while 28% expect them to go up, and 35% expect rates to remain the same.
“However, consumer perceptions of homebuying conditions remain overwhelmingly pessimistic, with only 17% of consumers indicating it’s a good time to buy a home,” Fannie Mae said.
Overall, the full index is up 9.1 points year over year.
A Survey First
“Mortgage rate optimism increased markedly again in January, with a survey-high percentage of consumers anticipating mortgage rate declines over the next year,” Doug Duncan, Fannie Mae senior vice president and chief economist, said in a statement. “For the first time in our National Housing Survey’s history, a greater share of consumers believe mortgage rates will decrease over the next year, rather than increase. Consumers also expressed greater confidence in their job situations this month, another sign that housing sentiment may continue to improve in 2024.
“However, while home affordability may improve if actual mortgage rates continue moving downward, other parts of the affordability equation have yet to ease or improve for consumers,” Duncan continued. “A large majority still think home prices will either increase or stay the same; the ‘good time to buy’ component continues to hover near its historical low; and fewer than one-in-five respondents indicated that their household income was significantly higher year over year, matching a survey low.
The Forecast
“All in all, while a lower mortgage rate path supports our forecast for a gradual increase in housing demand and sales activity in 2024, until we see a meaningful increase in housing supply, we expect affordability will remain a significant barrier to homeownership for many households,” Duncan added.
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