Following a sharp upward trend over the past year, the Fannie Mae Home Purchase Sentiment Index (HPSI) increased 0.4 points in November to 75. As consumers seem to be acclimating to the higher mortgage rate and home price environment, a new record-high share of consumers expect mortgage rates to decline over the next 12 months, while fewer respondents say they expect home prices to rise.
“Over the past year, we have seen a significant improvement in general consumer sentiment toward the housing market, largely driven by increased optimism that mortgage rates will fall and improved perceptions of both home buying and home selling conditions,” says Mark Palim, Fannie Mae senior vice president and chief economist.
“Notably, this improvement in sentiment continues a trend that began about two-and-a-half years ago following the sizable run-up in home prices during the pandemic, and it is likely due in part to consumers’ slow-but-steady acclimation to current market conditions. Of course, high home prices and high mortgage rates remain the primary reasons why the vast majority of consumers think it's a ‘bad time to buy’—trends that we expect to continue into the new year.”
While only 23% believe it's a “good time to buy a home,” on net, that component continued its upward trend and is now notably higher than last November’s share of 14%. The share of respondents saying it’s a “good time to sell” remained flat month over month but is also up from last year. Year over year, the HPSI is up 10.7 points.
The share of respondents who say mortgage rates will go down in the next 12 months increased from 39% to 45%, while those who expect mortgage rates to go up increased from 22% to 25%. As the percentage of those who are not concerned about losing their job remained unchanged month over month, the net share of respondents who say their household income is significantly higher than it was 12 months ago decreased from 1 percentage point month over month.
“Fortunately, a sharply growing share of consumers say they expect their personal financial situation to improve over the next year. Additionally, more consumers expect home price growth to slow, a belief recently shared by our expert panelists, as well, which may help ease some of the affordability burden and incentivize some households, especially those who have been waiting in the wings, to finally act on their home purchase decision,” Palim says.
Home Price Revisions
Last week, a panel of over 100 housing experts forecast home price growth to decelerate to 3.8% in 2025 and 3.6% in 2026, following an average expectation for national home price growth of 5.2% in 2024. According to the Q4 2024 Fannie Mae Home Price Expectations Survey (HPES), produced in partnership with Pulsenomics, the panel’s latest estimates of national home price growth represented an upward revision from last quarter’s expectations of 4.7% for 2024, 3.1% for 2025, and 3.3% for 2026, as measured by the Fannie Mae Home Price Index (FNM-HPI).
The Economic & Strategic Research (ESR) Group also surveyed panelists on their general housing outlook for 2025. On average, the panelists expect existing-home sales to remain sluggish for another year, new-home sales to trend slightly upward, and mortgage rates to remain elevated but modestly decline over the course of the year to 6.3%.
Additionally, depending on their expectations for accelerating or decelerating home prices in 2025, the ESR Group also asked for the major factors driving their home price forecast. The largest group, which represents roughly 80% of respondents, expects home price growth to decelerate, citing continued high mortgage rates, rising for-sale housing inventory, and slower wage growth as the main drivers.
“While home price growth is expected to ease next year, HPES panelists’ big-picture view for 2025 appears to be little changed compared to 2024, with most seeing another year of elevated mortgage rates and weak home sales,” adds Palim. “We share our panelists’ view that home price growth is likely to decelerate next year, as the mix of continued elevated mortgage rates and the run-up in home prices of the past four years will likely continue to strain affordability and remain an impediment to many would-be home buyers.”
