Mortgage rate optimism spikes as the Federal Reserve is expected to lower interest rates at its meeting on September 17–18 but homebuying pessimism persists, Fannie Mae’s Home Purchase Sentiment Index (HPSI) reveals. The Index increased 0.6 points in August to 72.1, as U.S. consumers reported significantly greater optimism about the future direction of mortgage rates despite showing little change in overall homebuying sentiment.
Last month, 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. 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. 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. 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%.
“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.
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 full index is up 5.2 points year over year.
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