Despite higher prices, consumers are beginning to feel better about the housing market, according to the latest Fannie Mae Home Purchase Sentiment Index (HPSI).
The Fanne Mae HPSI increased 0.7 points to 74.6 in October, pushing the index to its highest level since February 2022. The full index is up 9.7 points on a year-over-year basis.
In October, the share of consumers who think it is a good time to buy a home increased to 20% while the share who think it is a good time to sell a home declined to 64%. Consumers, on a general basis, believe home prices will increase while mortgage rates will fall over the next 12 months.
“While we have seen significant improvement in overall housing sentiment over the past two years, consumers’ perception of home buying conditions remains strained, with only 20% believing it a ‘good time’ to buy a home, primarily due to high home prices,” Fannie Mae senior vice president and chief economist Mark Palim says. “In fact, the share citing mortgage rates as the primary driver of their home buying pessimism declined again this month; however, since the fielding of the survey primarily in the first half of October, mortgage rates moved sharply higher, which may serve to suppress some of the recently observed rate optimism.”
The share of respondents expecting home prices to go up in the next 12 months remained unchanged at 39%, while the share who believe home prices will go down also stayed consistent at 23%. The percentage of respondents who anticipate mortgage rates will go down in the next 12 months decreased from 42% to 39% and the share who expect mortgage rates to go up also decreased from 27% to 22%.
The percentage of employed respondents who say they are not concerned about losing their job in the next 12 months increased from 77% to 79% while the percentage who say their household income is significantly higher than it was 12 months ago remained unchanged at 18%.
“One effect of the prolonged period of relatively high home prices of the past four years is that we are seeing a slowly growing preference to rent rather than buy on consumers’ next move,” Palim says. “With rent growth expected to remain modest in 2025, more consumers may be seeking—and finding—attractive deals in the rental market as they continue saving toward a future home purchase.”
