National Housing Survey

Mortgage Rate Optimism Spikes, but Homebuying Pessimism Persists

Regional Divergence in Consumer Sentiment Likely a Function of New Supply

September 9, 2024

The Fannie Mae (FNMA/OTCQB) Home Purchase Sentiment Index® (HPSI) increased 0.6 points in August to 72.1, as consumers reported significantly greater optimism about the future direction of mortgage rates despite showing little change in overall homebuying sentiment. In August, 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. 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. While in aggregate 65% believe it’s a good time to sell a home, interesting 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. The full index is up 5.2 points year over year.

“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. “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 continued: “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 suggest 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.’”