Mortgage Rate Optimism Hits Survey High

WASHINGTON – Fannie Mae said increased confidence in job security and anticipated mortgage rate reductions have driven its Home Purchase Sentiment Index (HPSI) up by 3.5 points in January to 70.7, its highest level of optimism since March 2022.

In January, 82% of consumers said they are not concerned about losing their job in the next 12 months, up from 75% the previous month. Additionally, an all-time survey-high 36% of respondents indicated they expect mortgage rates to go down in the next 12 months, while 28% expect them to go up,and 35% expect rates to remain the same.

However, consumer perceptions of homebuying conditions remain overwhelmingly pessimistic, with only 17% of consumers indicating it's a good time to buy a home. Overall, the full index is up 9.1 points year over year.

“Mortgage rate optimism increased markedly again in January, with a survey-high percentage of consumers anticipating mortgage rate declines over the next year,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “For the first time in our National Housing Survey's history, a greater share of consumers believe mortgage rates will decrease over the next year, rather than increase. Consumers also expressed greater confidence in their job situations this month, another sign that housing sentiment may continue to improve in 2024."

Duncan continued: "However, while home affordability may improve if actual mortgage rates continue moving downward, other parts of the affordability equation have yet to ease or improve for consumers. A large majority still think home prices will either increase or stay the same; the 'good time to buy' component continues to hover near its historical low; and fewer than one-in-five respondents indicated that their household income was significantly higher year over year, matching a survey low. All in all, while a lower mortgage rate path supports our forecast for a gradual increase in housing demand and sales activity in 2024, until we see a meaningful increase in housing supply, we expect affordability will remain a significant barrier to homeownership for many households."

Home Purchase Sentiment Index Component highlights

Fannie Mae's Home Purchase Sentiment Index (HPSI) increased in January by 3.5 points to 70.7. The HPSI is up 9.1 points compared to the same time last year.

Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home remained unchanged at 17%, while the percentage who say it is a bad time to buy remained unchanged at 83%. As a result, the net share of those who say it is a good time to buy remained unchanged month over month.

Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home increased from 57% to 60%, while the percentage who say it's a bad time to sell decreased from 42% to 40%. As a result, the net share of those who say it is a good time to sell increased 3 percentage points month over month.

Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 39% to 37%, while the percentage who say home prices will go down decreased from 24% to 22%. The share who think home prices will stay the same increased from 36% to 40%. As a result, the net share of those who say home prices will go up in the next 12 months remained unchanged month over month.

Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 31% to 36%, while the percentage who expect mortgage rates to go up decreased from 31% to 28%. The share who think mortgage rates will stay the same decreased from 36% to 35%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased 8 percentage points month over month.

Job Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 75% to 82%, while the percentage who say they are concerned decreased from 24% to 18%. As a result, the net share of those who say they are not concerned about losing their job increased 14 percentage points month over month.

Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 20% to 17%, while the percentage who say their household income is significantly lower remained unchanged at 13%. The percentage who say their household income is about the same increased from 67% to 69%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 3 percentage points month over month.

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 than they were a year earlier.

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).

The January 2024 National Housing Survey was conducted between January 2, 2024 and January 19, 2024.

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