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A Fannie Mae index that measures consumer sentiment about the housing market rose last month to the highest level in more than two years, as mortgage rates hit a 2024 low and a record number of Americans said they expected rates to keep coming down.
But more than eight in 10 Americans still saw September as a bad time to buy a home, and mortgage rates have been climbing again since Fannie Mae conducted the monthly survey on which the index is based.
Fannie Mae’s Home Purchase Sentiment Index (HPSI), which distills six questions from the mortgage giant’s monthly National Housing Survey (NHS) into a single number, climbed to 73.9 in September, up 1.8 points from August and 9.4 points from a year ago.
“Although most consumers continue to think it’s a ‘bad time’ to buy a home, the recent shift in attitude toward mortgage rates is pushing overall housing sentiment higher, and a growing share are now pointing to high home prices rather than high mortgage rates as the primary sticking point for affordability,” Fannie Mae Chief Economist Mark Palim said in a statement Monday.
Four of the HPSI’s six components improved in September, including mortgage rate outlook, buying conditions and change in household income.
Mark Palim
“Increased positivity that mortgage rates will continue to fall has driven the HPSI to a 30-month high, but we’ve yet to see consumers’ newfound rate optimism translate into a meaningful increase in home sales activity,” Palim said.
“Instead, as we noted in our latest housing forecast, existing home sales are on pace to record their lowest annual total since 1995. This signals to us that consumers are paying attention to the easing interest rate environment but still feel stymied by the considerable run-up in home prices over the last four years.”
The fourth HPSI component that improved — home price outlook — might end up proving to be a negative for home sales if consumers’ expectations are realized.
Three out of four consumers surveyed in September expect home prices will either go up in the next 12 months (39 percent) or stay the same (37 percent).
Only 23 percent of those surveyed expect home prices to go down in the next 12 months, down from 25 percent in August.
But the HPSI tallies an increase in consumer sentiment that home prices will go up as a positive for housing sentiment because it suggests would-be buyers and homeowners are more confident that properties will hold their values.
More than four in 10 consumers surveyed in September (42 percent) said they expect mortage rates to go down over the next 12 months, a new survey high in records dating to 2010. While the share who said they expect rates to go up also increased by a percentage point, the net share of those expecting mortgage rates to go down was up two percentage points, to 15 percent, also a record high.
While forecasters do expect that rates will come down in the long run, they’ve been headed in the opposite direction since the National Housing Survey was fielded.
Last month’s survey of 1,038 household financial decision-makers was conducted between Sept. 1 and Sept. 19, as mortgage rates were falling to their lowest point of the year.
Mortgage rates on the rebound
Since hitting a 2024 low of 6.03 percent on Sept. 17, rates on 30-year fixed-rate mortgages have bounced back, averaging 6.27 percent on Friday according to rate-lock data tracked by Optimal Blue.
Rates have been on the rise since the Federal Reserve approved its first rate cut in 4 years — a dramatic 50 basis-point reduction in the federal funds rate — on Sept. 18.
That’s because investors who fund most mortgages had already priced that move in, and because Fed policymakers signaled they would take a cautious approach in making further cuts.
The rebound in mortgage rates accelerated Friday with the release of a blowout jobs report that reinforced expectations that the Fed won’t move aggressively at future meetings to bring rates down.
Even as mortgage rates were hitting new 2024 lows in September, 81 percent of those surveyed by Fannie Mae said it was a bad time to buy.
That’s down from 83 percent in August, but still not far from an all-time survey high of 85 percent registered in October 2023, when mortgage rates were hitting post-pandemic highs.
Breaking out sentiment among renters, Palim said that over the last three months, the share of renters believing it’s a good time to buy has risen from 13 percent to 20 percent, and the share expecting mortgage rates to fall has risen from 16 percent to 30 percent.
“While these numbers are still relatively low, we think the improvement may signal that some potential homebuyers who have been waiting for mortgage rates to come down may be closer to coming off the sidelines, despite their ongoing concerns about home prices,” Palim said.
The share of consumers who say they would buy a home rather than rent remained unchanged at 68 percent.
While 65 percent of those surveyed in September said it was a good time to sell, the share who said it was a bad time to sell increased by one percentage point from August to 35 percent. The net share of those who said it was a good time to sell fell 1 percentage point from August to September, to 30 percent.
Many homeowners contemplating a move are reluctant to give up the low rate on their existing mortgage, a dilemma that’s been dubbed the lock-in effect.
“With the majority of homeowners locked into low mortgages, rates will need to keep falling consistently for many to feel comfortable moving on from the deals they secured years ago,” Redfin Senior Economist Elijah de la Campa said of a recent analysis that found homes are turning over this year at the lowest rate in 30 years.
The other component of the HPSI that deteriorated from August to September was job loss concern. The percentage of respondents saying they’re concerned about losing their job rose by a percentage point from August to September, to 22 percent.
Although not factored into the HPSI, the percentage of those who said they think the economy is on the right track rose two percentage points from August to 32 percent — a 4 percent increase from a year ago.
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