Housing sentiment improves on hopes for lower mortgage rates

Publish Date: February 07, 2024

Written by Matt Carter

- Originally published at Inman News - Matt Carter

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Consumer sentiment toward housing increased to the highest level in nearly two years in January, with a record number of Americans expecting mortgage rates to come down in the year ahead and eight in 10 workers feeling secure in their jobs.

That’s according to mortgage giant Fannie Mae’s latest National Housing Survey, which polls a nationally representative sample of more than 1,000 household financial decision makers on a range of housing-related issues each month.

Doug Duncan

“Mortgage rate optimism increased markedly again in January, with a survey-high percentage of consumers anticipating mortgage rate declines over the next year,” said Fannie Mae Chief Economist Doug Duncan, in a statement.

“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.”

Source: Fannie Mae National Housing Survey, January 2024.

Fannie Mae takes six questions from the National Housing Survey and distills them into a single number, the Fannie Mae Home Purchase Sentiment Index (HPSI). With three of the HPSI’s six components increasing from December to January, the HPSI rose 3.5 points to 70.7 — the highest level since March 2022.

Only 25 percent of Americans said they thought the economy was on the right track, down from 30 percent in December. But that more general question about the state of the economy is not factored into the HPSI.

The increase in the HPSI was driven by net improvement in consumer sentiment about mortgage rates, job security and selling conditions. Consumers were less likely to report that they’d seen a significant boost in household income, while sentiment about buying conditions and home prices remained unchanged.

While affordability may improve if mortgage rates do continue on the downward trajectory seen in the final two months of 2023, “other parts of the affordability equation have yet to ease or improve for consumers,” Duncan noted.

“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,” Duncan said. “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.”

Source: Fannie Mae National Housing Survey, January 2024.

With 36 percent of those polled saying they expect mortgage rates to decline in the next 12 months and only 28 percent expecting them to rise, the net share of Americans who expect mortgage rates to decline in the year ahead increased to 8 percent — a new all-time high in survey records dating to 2010.

But the share of consumers who said getting a mortgage would be difficult increased by one percentage point, to 58 percent, and the share who said getting a mortgage would be easy decreased by one percentage point, to 42 percent.

Source: Fannie Mae National Housing Survey, January 2024.

The vast majority of working Americans polled in January — 82 percent — said they weren’t concerned about losing their jobs in the next 12 months, up from 75 percent in December. With the percentage of those who said they were concerned about being laid off decreasing to 18 percent, the net share who weren’t concerned about becoming unemployed increased by 14 percentage points.

Source: Fannie Mae National Housing Survey, January 2024.

Only 17 percent of those surveyed in January thought it was a good time to buy a home, unchanged from December. Homebuyer sentiment hit an all-time low of 14 percent in November’s survey, when mortgage rates were near 2023 highs.

Source: Fannie Mae National Housing Survey, January 2024.

Consumers surveyed in January thought conditions for sellers had improved from the month before, with 60 percent saying it was a good time to sell, up from 57 percent in December. With 40 percent saying it was a bad time to sell, the net share who said January was a good time to sell was up three percentage points from December.

Source: Fannie Mae National Housing Survey, January 2024.

While the percentage of Americans who expected home prices to rise in the next 12 months declined to 37 percent in January, so did the share who expect prices to go down (22 percent). With 40 percent expecting prices to stay the same, the net share of those who said home prices will go up in the year ahead remained unchanged from December.

Source: Fannie Mae National Housing Survey, January 2024.

While not factored into the HPSI, the percentage of Americans who think the economy is on the wrong track jumped from 70 percent in December to 75 percent last month. That’s only slightly better than the 12-month high of 78 percent registered in October.

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