But Fannie Mae chief economist warns the bump in optimism may be temporary
Consumer confidence in the housing market skyrocketed in April to the highest level in two years, mainly driven by more optimistic expectations on mortgage rates.
The Fannie Mae Home Purchase Sentiment Index (HPSI) jumped 5.5 points month over month to a record high of 66.8. The improvement was boosted by consumers' sunnier mortgage rate expectations.
"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," said Fannie Mae chief economist Doug Duncan.
While the mortgage rate expectations component remains negative on net – meaning more respondents than not anticipate mortgage rates to rise over the next year – 22% of consumers in April believe mortgage rates will decline, compared to only 12% in March.
However, Duncan warned that the bump in optimism may 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."
The net share of consumers who said home prices will go up over the year increased 5% month over month to 37%.
"Until affordability improves for a larger swath of the homebuying public, we believe home sales will remain subdued compared to previous years," Duncan added.
Other HPSI component highlights:
- The net share of respondents who said it's a good time to buy a home increased 6% month over month to 23%.
- The net share of consumers who said it is a good time to sell a home increased 5% month over month to 62%.
- The net share of respondents who said they are not concerned about losing their job in the next 12 months increased 1% month over month to 79%.
- The net share of respondents who said their household income is significantly higher than 12 months ago increased 4% month over month to 24%.
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