Mortgage Rate Optimism Spikes, but Homebuying Pessimism Persists

Rhea-AI Summary

The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index® (HPSI) increased 0.6 points in August to 72.1, showing a significant rise in consumer optimism about future mortgage rates. A survey-high 39% of consumers expect mortgage rates to decline in the next 12 months, up from 29% in July. Despite this improved affordability outlook, only 17% of consumers believe it's a good time to buy a home.

The survey revealed interesting regional variations in housing sentiment, particularly between the South and Northeast, likely reflecting differences in housing supply and construction activity. While 65% of respondents overall believe it's a good time to sell a home, only 56% in the South agreed, compared to 80% in the Northeast.

The HPSI is up 5.2 points year over year, with notable changes in mortgage rate expectations and home price predictions. However, concerns about housing affordability and supply persist among consumers.

Positive

• HPSI increased 0.6 points in August to 72.1, up 5.2 points year over year
• Survey-high 39% of consumers expect mortgage rates to decline in the next 12 months
• 65% of respondents believe it's a good time to sell a home

Negative

• Only 17% of consumers believe it's a good time to buy a home
• Consumers remain apprehensive about housing market affordability and supply
• Percentage of respondents expecting home prices to go up decreased from 41% to 37%

Regional Divergence in Consumer Sentiment Likely a Function of New Supply

WASHINGTON, Sept. 9, 2024 /PRNewswire/ -- The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index^® (HPSI) increased 0.6 points in August to 72.1, as consumers reported significantly greater optimism about the future direction of mortgage rates despite showing little change in overall homebuying sentiment. In August, a survey-high 39% of consumers said they expect mortgage rates to decline in the next 12 months, up from 29% the month prior. This compares to 35% who expect mortgage rates to stay the same and 26% who expect rates to increase. A greater share of consumers also indicated that they expect home prices to decrease over the next 12 months, although the plurality continues to expect prices to increase. Despite the improved affordability outlook, consumers' perception of homebuying conditions remained unchanged, with only 17% indicating it's a good time to buy a home. While in aggregate 65% believe it's a good time to sell a home, interesting regional variations, including a significant gap between respondents in the South and Northeast regions, likely demonstrate ongoing supply dynamics and differences in the inventories of homes for sale from market to market. The full index is up 5.2 points year over year.

"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, Fannie Mae Vice President and Deputy Chief Economist. "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. However, our survey did capture some interesting regional variation likely related to supply: 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. 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."

Palim continued: "This likely reflects in part the wide geographic variation in new home construction activity. In the regions that had a stronger construction response following the pandemic, our latest survey data suggest that sellers may be losing some of their negotiating power due to the increased supply. That said, we also know from previous research that some potential homebuyers may be feeling additional pressure to move for non-financial reasons. Our recent Mortgage Understanding Survey showed that one-in-four respondents is actively considering purchasing a home in the next three years, and declining mortgage rates are likely to improve listing availability by further diminishing the so-called 'lock-in effect.'"

Home Purchase Sentiment Index – Component Highlights

Fannie Mae's Home Purchase Sentiment Index (HPSI) increased 0.6 points in August to 72.1. The HPSI is up 5.2 points compared to the same time last year. Read the full research report for additional information.

• Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home remained unchanged from last month (17%) while the percentage who say it is a bad time to buy increased from 82% to 83%. As a result, the net share of those who say it is a good time to buy decreased 1 percentage point month over month to -65%.
  
  
• Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home (65%) and the percentage who say it's a bad time to sell (34%) remained unchanged from last month. As a result, the net share of those who say it is a good time to sell stayed at 31% month over month.
  
  
• Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 41% to 37%, while the percentage who say home prices will go down increased from 21% to 25%. The share who think home prices will stay the same remained at 37%. As a result, the net share of those who say home prices will go up in the next 12 months decreased 8 percentage points month over month to 13%.
  
  
• Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 29% to 39%, while the percentage who expect mortgage rates to go up decreased from 31% to 26%. The share who think mortgage rates will stay the same decreased from 38% to 35%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased 16 percentage points month over month to 13%, the highest in survey history.
  
  
• Job Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 77% to 78%, while the percentage who say they are concerned stayed the same as last month (21%). As a result, the net share of those who say they are not concerned about losing their job increased 1 percentage point month over month to 57%.
  
  
• Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 18% to 17%, while the percentage who say their household income is significantly lower increased from 11% to 14%. The percentage who say their household income is about the same decreased from 69% to 68%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 4 percentage points month over month to 3%.

About Fannie Mae's Home Purchase Sentiment Index
The Home Purchase Sentiment Index^® (HPSI) distills information about consumers' home purchase sentiment from Fannie Mae's National Housing Survey^® (NHS) into a single number. The HPSI reflects consumers' current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers' evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher or lower than they were a year earlier.

About Fannie Mae's National Housing Survey
The National Housing Survey (NHS) is a monthly attitudinal survey, launched in 2010, which polls the adult general population of the United States to assess their attitudes toward owning and renting a home, purchase and rental prices, household finances, and overall confidence in the economy. Each respondent is asked more than 100 questions, making the NHS one of the most detailed attitudinal longitudinal surveys of its kind, to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). For more information, please see the Technical Notes.

Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to support the housing market. The August 2024 National Housing Survey was conducted between August 1, 2024 and August 19, 2024. Most of the data collection occurred during the first two weeks of this period. The latest NHS was conducted exclusively through AmeriSpeak^®, NORC at the University of Chicago's probability-based panel, in coordination with Fannie Mae and PSB Insights. Calculations are made using unrounded and weighted respondent level data to help ensure precision in NHS results from wave to wave. As a result, minor differences in calculated data (summarized results, net calculations, etc.) of up to 1 percentage point may occur due to rounding.

Detailed HPSI & NHS Findings
For detailed findings from the Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results.

To receive e-mail updates with other housing market research from Fannie Mae's Economic & Strategic Research Group, please click here.

About the ESR Group
Fannie Mae's Economic and Strategic Research Group, led by Chief Economist Doug Duncan, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets. The ESR Group was awarded the prestigious 2022 Lawrence R. Klein Award for Blue Chip Forecast Accuracy based on the accuracy of its macroeconomic forecasts published over the 4-year period from 2018 to 2021.

About Fannie Mae
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:
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https://www.fanniemae.com/news

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Opinions, analyses, estimates, forecasts, beliefs, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group or survey respondents included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, beliefs, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, beliefs, and other views published by the ESR Group represent the views of that group or survey respondents as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

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SOURCE Fannie Mae

FAQ

What was the Fannie Mae (FNMA) Home Purchase Sentiment Index in August 2024?

The Fannie Mae (FNMA) Home Purchase Sentiment Index (HPSI) increased to 72.1 in August 2024, up 0.6 points from the previous month.

How many consumers expect mortgage rates to decline in the next 12 months according to the August 2024 survey?

According to the August 2024 survey, a record-high 39% of consumers expect mortgage rates to decline in the next 12 months.

What percentage of respondents believe it's a good time to buy a home in August 2024?

Only 17% of respondents indicated that it's a good time to buy a home in August 2024, according to the Fannie Mae survey.

How does the sentiment about selling homes differ between the South and Northeast regions in August 2024?

In August 2024, 56% of respondents from the South indicated it's a good time to sell, compared to 80% in the Northeast, showing a significant regional difference.