Mortgage Rate Sentiment Reaches Highest Level in Nearly Two Years 

The Fannie Mae Home Purchase Sentiment Index (HPSI) experienced a 3.5-point increase in January to 70.7—the highest level since March 2022. This increase was mostly caused by a significant rise in the percentage of buyers who expect mortgage rates to drop, along with an increase in consumer confidence in job stability. Up from 75% the previous month, an estimated 82% of consumers said in January that they are not worried about losing their jobs in the upcoming 12 months.

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

In addition, a record-breaking 36% of participants in the study said they anticipate lower mortgage rates in the upcoming year, compared to 28% who foresee higher rates and 35% who expect no change in rates. Only 17% of consumers believe that now is a good time to buy a home, highlighting the negative consumer assessments of the market.

“However, while home affordability may improve if actual mortgage rates continue moving downward, other parts of the affordability equation have yet to ease or improve for consumers,” said Duncan. “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.”

Home Purchase Sentiment Index—Component Highlights:

Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased in January by 3.5 points to 70.7. Overall, the HPSI is up 9.1 points compared to the same time last year.

  • Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home remained unchanged at 17%, while the percentage who say it is a bad time to buy remained unchanged at 83%. As a result, the net share of those who say it is a good time to buy remained unchanged month-over-month (MoM).
  • Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home increased from 57% to 60%, while the percentage who say it’s a bad time to sell decreased from 42% to 40%. As a result, the net share of those who say it is a good time to sell increased by three percentage points, MoM.
  • Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 39% to 37%, while the percentage who say home prices will go down decreased from 24% to 22%. The share of people who think home prices will stay the same increased from 36% to 40%. As a result, the net share of those who say home prices will go up in the next 12 months remained unchanged MoM.
  • Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 31% to 36%, while the percentage who expect mortgage rates to go up decreased from 31% to 28%. The share of people who think mortgage rates will stay the same decreased from 36% to 35%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased by eight percentage points, MoM.
  • Job Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 75% to 82%, while the percentage who say they are concerned decreased from 24% to 18%. As a result, the net share of those who say they are not concerned about losing their job increased by 14 percentage points MoM.
  • Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 20% to 17%, while the percentage of respondents who say their household income is significantly lower remained unchanged at 13%. The percentage of people who say their household income is about the same increased from 67% to 69%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased by three percentage points MoM.

“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,” Duncan concluded.

To read the full report, click here.

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Demetria C. Lester

Demetria C. Lester

Demetria C. Lester is a reporter for MortgagePoint (formerly DS News and MReport) with more than eight years of writing and editing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News and the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is a jazz aficionado, Harry Potter fanatic, and likes to read. She can be reached at demetria.lester@thefivestar.com.
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