Rising rates, falling optimism - what’s next for homebuyers?
Consumer sentiment toward the housing market has declined on a year-over-year basis for the first time since 2023, according to the latest Fannie Mae Home Purchase Sentiment Index (HPSI). The index fell by 1.8 points in February to 71.6, reflecting growing pessimism about mortgage rates and personal financial situations.
The percentage of consumers who believe mortgage rates will decline over the next year fell from 35% to 30%, while those expecting an increase in rates rose from 32% to 33%. Additionally, concerns over personal finances contributed to the drop in sentiment, as more consumers expressed worries about potential job losses and reported lower household income compared to the previous year.
“In February, the HPSI saw its first year-over-year decline in nearly two years, which was mostly due to a shrinking share of consumers expressing optimism about the direction of mortgage rates,” said Mark Palim, Fannie Mae senior vice president and chief economist. “This growing pessimism makes sense, as mortgage rates had remained near the 7% threshold for a few months.”
Key findings
- Buying conditions: The share of respondents who say it is a good time to buy increased slightly to 24%, but 76% still consider it a bad time due to high home prices.
- Selling conditions: The percentage of those who believe it is a good time to sell dropped from 63% to 62%.
- Home price expectations: The share of consumers expecting home prices to rise fell to 41%, while those anticipating a decline increased slightly to 23%.
- Mortgage rate expectations: The percentage of respondents expecting mortgage rates to decrease dropped 6 percentage points to 30%.
- Job security: The proportion of employed respondents unconcerned about job loss declined slightly to 77%.
- Household income: The share of respondents reporting significantly higher income rose to 18%, but those reporting a decrease grew to 11%.
Housing market outlook
Fannie Mae noted that the decline in consumer sentiment highlights ongoing challenges in the housing market, including affordability concerns and a lack of inventory. While some buyers have adjusted to elevated mortgage rates, affordability remains a significant obstacle. Fannie Mae forecasts a relatively light home sales market due to these factors.
The data was collected as part of Fannie Mae’s National Housing Survey, conducted between February 1 and February 18, 2025.
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