Fannie Mae sheds light…
Fannie Mae’s latest report brings a wave of optimism to the housing market, with the Home Purchase Sentiment Index (HPSI) hitting its highest level since March 2022.
The January HPSI climbed 3.5 points month over month and 9.1 points year over year to a 70.7 reading – its highest point in 23 months. This rebound reflects the surge in consumer confidence regarding job security and a notable increase in mortgage rate optimism, which has also reached an all-time high in the survey’s history.
A survey-high 36% of those surveyed are betting on mortgage rates falling in the next 12 months, outnumbering those who expect rates to rise or stay the same. Most respondents (82%) also feel secure about their jobs over the next year, a jump from 75% in December.
“Mortgage rate optimism increased markedly again in January, with a survey-high percentage of consumers anticipating mortgage rate declines over the next year,” chief economist Doug Duncan said in Fannie Mae’s report. “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.”
Yet, despite these more optimistic views, the appetite for buying homes remains tepid, with only 17% thinking it’s a good time to make a purchase, underscoring ongoing concerns about the cost of buying a home. The net share of those who say home prices will go up in the next 12 months remained unchanged at 37%.
“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 added. “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.”
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However, the outlook for sellers has improved, with 60% of respondents now saying it’s a good time to sell, up from 57%, and those thinking it’s a bad time to sell dropping to 40% from 42%. This has resulted in a three percentage point month-over-month increase in the net share of those who believe it’s a favorable time to sell.
“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 said.
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