Fannie Mae Finds Housing Confidence Inching Higher

(Illustration courtesy of Fannie Mae)

Fannie Mae, Washington, D.C., reported its Home Purchase Sentiment Index increased 1.8 points in September to 73.9–its highest level in more than two years–as consumers are optimistic mortgage rates will decline further.

In September, a record 42% of consumers said they expect mortgage rates to decline, up from 39% the month prior and 24% in June, Fannie Mae said. This compares to 31% who said they expect mortgage rates to stay the same and 27% who expect rates will increase. But a plurality of consumers also indicated they expect home prices to increase over the next 12 months, which would offset some of the expected rate-driven improvement to affordability.

Survey respondents’ perception of homebuying conditions ticked up slightly in September, but remains not far from its record low, with only 19% indicating it’s a good time to buy a home Fannie Mae found. On the flip side, 65 percent of consumers think it’s a good time to sell a home. The full index is up 9.4 points year over year.

“Although most consumers continue to think it’s a ‘bad time’ to buy a home, the recent shift in attitude toward mortgage rates is pushing overall housing sentiment higher, and a growing share are now pointing to high home prices rather than high mortgage rates as the primary sticking point for affordability,” said Mark Palim, Fannie Mae Senior Vice President and Chief Economist. “Increased positivity that mortgage rates will continue to fall has driven the HPSI to a 30-month high, but we’ve yet to see consumers’ newfound rate optimism translate into a meaningful increase in home sales activity.”

Palim noted Fannie Mae’s latest housing forecast found existing home sales are on pace to record their lowest annual total since 1995. “This signals to us that consumers are paying attention to the easing interest rate environment but still feel stymied by the considerable run-up in home prices over the last four years,” he said.