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You are at:Home » Housing Confidence Inches Up Amid Growing Optimism Toward Mortgage Rates
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Housing Confidence Inches Up Amid Growing Optimism Toward Mortgage Rates

By Rent Magazine ContributorOctober 7, 20243 Mins Read
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Surge in Mortgage Rate Optimism Drives Confidence

Fannie Mae’s Home Purchase Sentiment Index® (HPSI) increased by 1.8 points in September, reaching 73.9, its highest level in over two years. This boost in housing sentiment comes as consumers reported record-high optimism regarding the future of mortgage rates, with 42% of respondents expecting mortgage rates to decrease in the next 12 months, up from 39% in August and 24% in June.

Despite these optimistic expectations, the HPSI still reflects caution. A plurality of respondents (39%) expect mortgage rates to remain stable, and 27% anticipate further rate hikes. While home prices are expected to continue rising, many consumers still feel that affordability remains a challenge. Only 19% of consumers believe it’s a good time to buy a home, though this marks a slight improvement from previous months.

Growing Optimism, Particularly Among Renters

The positive shift in sentiment is also noticeable among renters, a group often seen as a primary source of first-time homebuyers. In the last three months, the percentage of renters who believe it is a good time to buy a home has risen from 13% to 20%. Meanwhile, the share of renters expecting mortgage rates to fall has jumped from 16% to 30%. While these numbers are still relatively low, the increase signals that some potential buyers may soon take action, despite concerns over rising home prices.

Key HPSI Components and Findings

  • Good/Bad Time to Buy: The percentage of consumers who think it’s a good time to buy a home increased by 2 percentage points to 19%, while those who think it’s a bad time to buy decreased slightly from 83% to 81%.

  • Good/Bad Time to Sell: The percentage of consumers who believe it’s a good time to sell remained steady at 65%, while the percentage who think it’s a bad time to sell increased by 1 percentage point to 35%.

  • Home Price Expectations: The percentage of consumers who think home prices will go up over the next 12 months increased from 37% to 39%, while those who expect prices to fall decreased slightly from 25% to 23%.

  • Mortgage Rate Expectations: 42% of respondents expect mortgage rates to decline, marking a new survey high. 27% believe rates will rise, and 31% expect them to stay the same.

Job Loss and Income Concerns

  • Job Loss Concern: The percentage of respondents who are not concerned about losing their job in the next 12 months decreased slightly from 78% to 77%, with those expressing concern rising by 1 percentage point to 22%.

  • Household Income: The percentage of respondents who say their household income is significantly higher than a year ago increased from 17% to 18%, while those who feel their income is lower dropped from 14% to 11%.

Looking Ahead

While the housing market remains challenged by affordability issues, the overall sentiment shift, especially regarding mortgage rates, is a positive sign for future housing demand. The HPSI has now reached its highest level in two years, reflecting growing optimism that mortgage rates will ease, which could spur more activity in the housing market in the coming months.

However, as Mark Palim, Fannie Mae’s Senior Vice President and Chief Economist, points out, “We have yet to see this newfound rate optimism translate into a meaningful increase in home sales activity.” With existing home sales on track for their lowest annual total since 1995, consumers remain cautious, balancing optimism about mortgage rates with ongoing concerns over home prices.

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