In December, the Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index® (HPSI) saw a 2.9-point increase to 67.2 driven by a significant rise in the percentage of consumers anticipating a decrease in mortgage rates over the next 12 months. Notably, a survey-record 31% of consumers expressed expectations for a decline in mortgage rates, with 31% anticipating an increase and 36% foreseeing rates to remain unchanged.
This significant shift in consumer expectations comes on the heels of the recent bond market rally and an already-significant downtick in 30-year mortgage rates, from their high of nearly 8% in early November to 6.62% as of this past week. Notably, homeowners and higher-income groups reported greater rate optimism than renters; in fact, for the first time in our National Housing Survey's history, more homeowners, on net, believe mortgage rates will go down than go up.
Mark Palim, Vice President and Deputy Chief Economist at Fannie Mae
While consumer sentiment regarding homebuying conditions continues to lean towards the negative, there was a slight uptick in this specific aspect of the HPSI, with 17% of consumers now deeming it an advantageous time to purchase a home, compared to last month's 14%, which marked a survey low. Overall, the comprehensive index has experienced a year-over-year increase of 6.2 points.
Home Purchase Sentiment Index – Component Highlights
- Ideal/Bad Time to Buy: The proportion of survey participants indicating that now is a favorable time to purchase a home rose from 14% to 17%, whereas those who deemed it an unfavorable time to buy decreased from 85% to 83%. Consequently, the net percentage of those advocating for a propitious time to buy increased by 5 points from the previous month.
- Ideal/Bad Time to Sell: The portion of respondents expressing confidence in the current market for selling a home decreased from 60% to 57%, while those perceiving it as an inopportune time to sell increased from 40% to 42%. Consequently, the net share of those considering it a favorable time to sell dipped by 5 percentage points month over month.
- Home Price Expectations: The percentage of respondents anticipating an increase in home prices over the next 12 months decreased from 41% to 39%, while those predicting a decline remained steady at 24%. The proportion of those expecting home prices to remain unchanged rose from 35% to 36%. As a result, the net share of those projecting an increase in home prices over the next 12 months decreased by 2 percentage points month over month.
- Mortgage Rate Expectations: The percentage of respondents anticipating a drop in mortgage rates over the next 12 months increased from 22% to 31%, while those expecting an increase in rates decreased from 44% to 31%. The proportion of those anticipating no change in mortgage rates rose from 34% to 36%. Consequently, the net share of those predicting a decrease in mortgage rates over the next 12 months surged by 22 percentage points month over month.
- Job Loss Concern: The percentage of respondents expressing no apprehension about potential job loss in the next 12 months decreased from 76% to 75%, while those expressing concern increased from 23% to 24%. Consequently, the net share of those unconcerned about job loss decreased by 3 percentage points month over month.
- Household Income: The percentage of respondents reporting a significantly higher household income compared to 12 months ago increased from 19% to 20%, whereas those reporting substantially lower household income increased from 12% to 13%. The proportion reporting no significant change in household income decreased from 68% to 67%. Consequently, the net share of those reporting significantly higher household income compared to 12 months ago remained unchanged from the previous month.
Mihaela Lica Butler
Mihaela Lica Butler is senior partner at Pamil Visions PR. She is a widely cited authority on public relations issues, with an experience of over 25 years in online PR, marketing, and SEO.She covers startups, online marketing, social media, SEO, and other topics of interest for Realty Biz News.
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