Consumers are much more optimistic about the way mortgage rates are trending, though that positivity hasn’t yet bled into overall perception of the housing market.
That’s according to the latest iteration of Fannie Mae’s Home Purchase Sentiment Index (HPSI), which was up 0.6 points in August to a reading of 72.1. The index is designed to express consumers’ views of the purchase market into a single number; the higher the reading, the more positive the consumer perception of the market. The reading is derived from consumers’ answers to a six-question survey, with Fannie also tracking trends for each of the component questions.
The most notable shift in August’s index came in the survey question tracking mortgage rate expectations, with the share of respondents who say rates will go down in the next 12 months surging from 29% to 39%, a new survey high. Conversely, the share who expect mortgage rates to go up decreased from 31% to 26%, with the share who think rates will stay the same down as well from 38% to 35%.
As a result, the net share of those who say rates will decrease over the next year rose 16 percentage points month over month to 13% — highest in survey history.
People are also more optimistic about home prices, with the share of respondents who believe prices will rise in the next 12 months falling from 41% to 37%. The percentage who say home prices will go down, meanwhile, increased from 21% to 25%.
Unfortunately, such hope about the direction of affordability hasn’t impacted overall homebuying sentiment. Just 17% of survey respondents indicated that it’s a good time to buy a home. The vast majority of people still believe it’s a bad time to buy, with the percentage of respondents indicating so creeping upward from 82% to 83%.
“Despite significantly greater optimism that mortgage rates and home prices will move in a more favorable direction for potential homebuyers, most consumers remain apprehensive about the housing market and continue to point to the lack of affordability and supply as the chief reasons for their pessimism,” said Mark Palim, vice president and deputy chief economist at Fannie Mae. “On a national level, housing sentiment was largely unchanged in August despite some positive developments for affordability, including a meaningful decline in actual mortgage rates and an uptick in home listings in certain markets, particularly in the Sunbelt.”
Palim did add that Fannie’s survey captured some noteworthy regional variations, likely related to substantial geographic variations in inventory across the country.
“In August, 56% of survey respondents from the South indicated that it’s a ‘good time to sell,’ a decrease of 5 percentage points month over month,” Palim said. “This represented a strong divergence from the Northeast (80%), Midwest (70%), and West (66%) regions’ sense of home-selling conditions, each of which moved higher this month.”
