Consumer Optimism About Mortgage Rates Jumps Significantly

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Jan 08, 2024, 08:30 ET

Survey-High Share of Consumers Now Expect Mortgage Rates to Go Down

WASHINGTON, Jan. 8, 2024 /PRNewswire/ -- The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index^® (HPSI) increased 2.9 points in December to 67.2, due primarily to a significant jump in the share of consumers expecting mortgage rates to go down over the next 12 months. In December, a survey-high 31% of consumers indicated that they expect mortgage rates to go down, while 31% expect them to go up, and 36% expect rates to remain the same. Although consumer perceptions of homebuying conditions remain overwhelmingly pessimistic, that particular component of the HPSI ticked up slightly month over month, with 17% of consumers now indicating it's a good time to buy a home, compared to 14% last month, a survey low. Overall, the full index is up 6.2 points year over year.

"Mortgage rate optimism increased dramatically this month, with a survey-high share of consumers anticipating mortgage rate declines over the next year," said Mark Palim, Vice President and Deputy Chief Economist at Fannie Mae. "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."

Palim continued: "A more optimistic rate outlook among consumers may signal an expectation that home affordability pressures will ease in 2024. Homeowners have told us repeatedly of late that high mortgage rates are the top reason why it's both a bad time to buy and sell a home, and so a more positive mortgage rate outlook may incent some to list their homes for sale, helping increase the supply of existing homes in the new year. Of course, that's likely dependent on the extent to which mortgage rate expectations are met with actual mortgage rate declines. Like many others, even if rates fall further, we continue to believe that affordability will be tempered in part by elevated home prices, especially for first-time homebuyers, and we expect the pace of home sales improvement to be modest in 2024."

Home Purchase Sentiment Index – Component Highlights

Fannie Mae's Home Purchase Sentiment Index (HPSI) increased in December by 2.9 points to 67.2. The HPSI is up 6.2 points compared to the same time last year. Read the full research report for additional information.

Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home increased from 14% to 17%, while the percentage who say it is a bad time to buy decreased from 85% to 83%. As a result, the net share of those who say it is a good time to buy increased 5 percentage points month over month.
Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home decreased from 60% to 57%, while the percentage who say it's a bad time to sell increased from 40% to 42%. As a result, the net share of those who say it is a good time to sell decreased 5 percentage points month over month.
Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 41% to 39%, while the percentage who say home prices will go down remained unchanged at 24%. The share who think home prices will stay the same increased from 35% to 36%. As a result, the net share of those who say home prices will go up in the next 12 months decreased 2 percentage points month over month.
Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 22% to 31%, while the percentage who expect mortgage rates to go up decreased from 44% to 31%. The share who think mortgage rates will stay the same increased from 34% to 36%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased 22 percentage points month over month.
Job Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 76% to 75%, while the percentage who say they are concerned increased from 23% to 24%. As a result, the net share of those who say they are not concerned about losing their job decreased 3 percentage points month over month.
Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago increased from 19% to 20%, while the percentage who say their household income is significantly lower increased from 12% to 13%. The percentage who say their household income is about the same decreased from 68% to 67%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago remained unchanged month over month.

About Fannie Mae's Home Purchase Sentiment Index
The Home Purchase Sentiment Index^® (HPSI) distills information about consumers' home purchase sentiment from Fannie Mae's National Housing Survey^® (NHS) into a single number. The HPSI reflects consumers' current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers' evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

About Fannie Mae's National Housing Survey
The National Housing Survey (NHS) is a monthly attitudinal survey, launched in 2010, which polls the adult general population of the United States to assess their attitudes toward owning and renting a home, purchase and rental prices, household finances, and overall confidence in the economy. Each respondent is asked more than 100 questions, making the NHS one of the most detailed attitudinal longitudinal surveys of its kind, to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). For more information, please see the Technical Notes.

Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to support the housing market. The December 2023 National Housing Survey was conducted between December 1, 2023 and December 18, 2023. Most of the data collection occurred during the first two weeks of this period. The latest NHS was conducted exclusively through AmeriSpeak^®, NORC at the University of Chicago's probability-based panel, on behalf of PSB Insights and in coordination with Fannie Mae. Calculations are made using unrounded and weighted respondent level data to help ensure precision in NHS results from wave to wave. As a result, minor differences in calculated data (summarized results, net calculations, etc.) of up to 1 percentage point may occur due to rounding.

Detailed HPSI & NHS Findings
For detailed findings from the Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results.

To receive e-mail updates with other housing market research from Fannie Mae's Economic & Strategic Research Group, please click here.

About the ESR Group
Fannie Mae's Economic and Strategic Research Group, led by Chief Economist Doug Duncan, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets. The ESR Group was awarded the prestigious 2022 Lawrence R. Klein Award for Blue Chip Forecast Accuracy based on the accuracy of its macroeconomic forecasts published over the 4-year period from 2018 to 2021.

About Fannie Mae
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:

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https://www.fanniemae.com/news

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Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group or survey respondents included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group or survey respondents as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

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