Consumers reported a little more hopefulness for mortgage rates in August with 39% expecting rates to decline in the next 12 months, a jump from 29% in July.
However, the increase in mortgage rate optimism did not move overall home buying sentiment, according to the Fannie Me Home Purchase Sentiment Index (HPSI) which increased 0.6 points in August to 72.1. The full index is up 5.2 points year over year.
In August, a greater share of consumers also indicated that they expect home prices to decrease over the next 12 months, although the majority continues to expect prices to increase and only an unchanged 17% indicated it's a good time to buy a home.
While an aggregate 65% believe it's a good time to sell a home, 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, Fannie Mae reports.
"Despite significantly greater optimism that mortgage rates and home prices will move in a more favorable direction for potential home buyers, 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," says 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 continues, "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 suggests 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.'"
Job confidence increased in August. 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%). In terms of household income, 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%.
