Are consumers adjusting to the current mortgage rate environment?

Results from Fannie's latest sentiment survey suggest households are recalibrating expectations

The Fannie Mae Home Purchase Sentiment Index (HPSI) saw its first decrease in four months in March, receding 0.9 points to a reading of 71.9.

The index took a step back largely because consumers are growing more pessimistic once again about the direction of mortgage rates, with 34% now anticipating that mortgage rates will rise in the next 12 months. That’s up from 32% one month prior and surpassing the 29% this month who believe that mortgage rates will drop.

Still, the index remained mostly unchanged as consumer views on both homebuying and home selling conditions remain on the uptick. Year over year, the index is still on a solidly upward trend, climbing by 10.6 points.

“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, senior vice president and chief economist at Fannie. “Both our ‘good time to buy’ and ‘good time to sell’ measures continued their slow upward drift this month. … 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.”

The percentage of March HPSI survey respondents who said it is a good time to buy rose from 19% to 21%. The share of those who perceive it’s a bad time to buy, on the other hand, receded from 81% to 79%, resulting in a net share of those who say it’s a good time to buy growing by 4 percentage points from February.

Meanwhile, the percentage who think it’s a good time to sell inched upward from 65% to 66%, while the percentage of those who believe it’s a bad time to sell is down from 35% to 34%. The net share of people wo think it’s good time to sell, therefore, was up 2 percentage points month over month.

Affordability woes continue to plague the market and consumers’ perception of it, holding back the share who view it as a good time to sell. And while the percentage of respondents who think home prices will go up actually fell from 42% to 40%, the percentage who think home prices will go down dropped as well, from 23% in February to 20% in March. As a result, the net share of those who say home prices will grow in the next year is up 1 percentage point.

Duncan, however, expressed optimism that inventory will continue to grow in the coming months, bringing prices down and deals up.

“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,” he said. “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 need to move for other life reasons.”


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