Buyers are less optimistic, but sellers see slight improvement
The Fannie Mae Home Purchase Sentiment Index (HPSI) declined for the first time in four months, dropping 0.9 points to 71.9 in March. This dip marks the first decrease since November 2023 and is primarily attributed to increased pessimism about future mortgage rates.
Thirty-four per cent (34%) of consumers now believe rates will rise in the next year, up from 32% last month. Despite growing pessimism about rates, both homebuying and home-selling sentiment saw slight gains in March. However, affordability concerns continue to dampen the overall belief that it is a “good time to buy,” with only 21% of consumers agreeing with that sentiment.
“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’s 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.
“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.”
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Year-over-year, the HPSI has shown notable growth, climbing 10.6 points.
“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,” Duncan said in the report. “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.”
Here’s a detailed breakdown of the HPSI components in March:
- The share of respondents who believe it’s a good time to buy a home increased slightly from 19% to 21%, while those who think it a bad time to buy dropped from 81% to 79%.
- Sentiments about selling conditions also improved modestly, with 66% saying it’s a good time to sell (up from 65%), and the percentage of those who disagree decreased from 35% to 34%.
- Expectations for home prices showed a mixed view, with fewer respondents predicting increases and decreases in prices, leading to a slight overall optimism gain. The net share of those who say home prices will go up in the next 12 months increased 1% over the month.
- Mortgage rate outlook worsened, with more consumers expecting rates to rise rather than fall over the next year. The net share of those who say mortgage rates will go down over the next 12 months decreased 8% month over month.
- Concerns about job security saw a slight uptick, reflecting growing economic uncertainties. The net share of those who say they are not concerned about losing their job decreased 2% month over month.
- Household income perceptions remained mostly stable, with slight variations in those reporting higher or lower incomes compared to the previous year. The net share of those who say their household income is significantly higher than 12 months ago decreased 2% in March.
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