Optimism in Mortgage Rates Rises Amid Homebuying Pessimism - FNMA

Fannie Mae's Home Purchase Sentiment Index (HPSI) has reported an increase of 0.6 points in August to reach 72.1, revealing a significant boost in consumer optimism about the future trajectory of mortgage rates, despite little change in overall homebuying sentiment. 
 
According to the survey conducted by Fannie Mae FNMA, an unprecedented 39% of consumers anticipate that mortgage rates will decrease over the next year—a rise from last month's figure of 29%. This contrasts with the 35% who predict stable mortgage rates and the remaining 26% who forecast an increase. A larger proportion also expect home prices to fall within this period; however, most still believe they will rise. 
 
Despite these improved forecasts for affordability, perceptions around conditions for purchasing homes have remained steady. Only 17% consider it currently advantageous to buy a house, while conversely, nearly two-thirds (65%) think it is a good time to sell their property. The report identifies intriguing regional variations that likely point towards ongoing supply dynamics and differences among housing market inventories. 
 
"While many potential buyers are anticipating more favorable movements in terms of both mortgage rates and home prices," said Mark Palim, Vice President and Deputy Chief Economist at Fannie Mae, "the majority continue their cautious stance toward the housing market due largely to concerns surrounding lack of supply and affordability." 
 
Palim observes some interesting regional disparities linked with supply issues: in August, only just over half (56%) of respondents from southern areas believed it was 'a good time to sell,' down by five percentage points compared with July figures. In contrast, sentiment regarding selling conditions significantly diverged among other regions such as Northeast (80%), Midwest (70%), and West (66%), all showing increases this month. 
 
"This divergence probably reflects varying levels of new house construction activity across different geographical locations," says Palim. "In those regions where there had been stronger post-pandemic construction responses, our latest survey data suggests that sellers might be losing some of their bargaining power due to increased supply. However, we also understand from previous research that some potential buyers may be feeling additional pressure to move for non-financial reasons." 
 
Fannie Mae's Home Purchase Sentiment Index (HPSI) is a single-figure representation derived from the National Housing Survey® (NHS). It reflects consumers' current views and future expectations regarding housing market conditions and complements existing data sources for informing housing-related analysis and decision-making processes. 
 
The NHS is a monthly attitudinal survey launched in 2010, which polls US adults about their attitudes toward owning or renting homes, purchase and rental prices, household finances, as well as overall confidence in the economy. Each respondent answers more than 100 questions, making the NHS one of the most detailed longitudinal surveys of its kind, tracking shifts in attitude over time. 
 
These findings underscore how regional disparities can significantly impact consumer sentiment towards home buying and selling. Despite optimism about declining mortgage rates, concerns around affordability persist, suggesting continued caution among prospective buyers.