For the first time in nearly two years, consumer housing sentiment year-over-year has taken a downward turn. Fannie Mae’s Home Purchase Sentiment Index (HPSI) dropped by 1.8 points in February, now sitting at 71.6. This decline marks a shift in consumer outlook, largely driven by growing pessimism about the future direction of mortgage rates.
"In February, the HPSI saw its first year-over-year decline in nearly two years, which was mostly due to a shrinking share of consumers expressing optimism about the direction of mortgage rates," said Mark Palim, Senior Vice President and Chief Economist at Fannie Mae. "This growing pessimism makes sense, as mortgage rates had remained near the 7% threshold for a few months, including when we fielded this survey.”
The percentage of respondents who believe it’s a good time to buy a home increased slightly to 24%, while those who feel it's a good time to sell dipped to 62%. However, a significant drop in optimism around personal financial situations — including household income and concerns about job security—further fueled the overall decline in sentiment. Compared to last year, the HPSI is senow down by 1.2 points.
“The decline in sentiment was further impacted by consumers' growing concerns about their own personal financial situations,” Palim added. “While some consumers may be slowly acclimating to the higher mortgage rate environment, the vast majority continue to believe it is a 'bad time' to buy a home – with high home prices cited as the primary sticking point. We continue to expect home sales activity to remain relatively light over our forecast horizon due to the ongoing lack of supply and overall unaffordability."
Key Components Of The Home Purchase Sentiment Index
Fannie Mae’s HPSI dropped 1.8 points in February to 71.6, marking a 1.2-point decline compared to the same time last year.
- Is it a Good Time to Buy?
The percentage of respondents who said it’s a good time to buy increased from 22% to 24%, but 76% still felt it’s a bad time to buy. The net share of consumers who think it’s a good time to buy rose by 2 percentage points to negative 53%.
- Is it a Good Time to Sell?
Those believing it’s a good time to sell decreased slightly from 63% to 62%, with those saying it’s a bad time to sell increasing from 36% to 37%. As a result, the net share of respondents who think it’s a good time to sell dropped by 3 percentage points to 25%.
- Home Price Expectations:
41% of consumers expect home prices to rise in the next 12 months, down from 43% in January, while 23% expect them to fall. The net share of those expecting price increases fell to 18%, down 2 percentage points from the previous month.
- Mortgage Rate Expectations:
While 30% of respondents expect mortgage rates to drop over the next year (down from 35% in January), 33% believe rates will rise. The net share of consumers expecting mortgage rates to decline dropped 6 percentage points to negative 3%.
- Job Loss Concerns:
Concern over job loss has slightly increased. 23% of employed respondents said they are worried about losing their job within the next 12 months, up from 22% last month. The net share of those not concerned about losing their job decreased by 1 percentage point to 55%.
- Household Income:
A slight increase in those reporting higher household incomes compared to a year ago (18% vs. 17%) was offset by a rise in those reporting lower household incomes (11% vs. 9%). As a result, the net share of respondents who report a significantly higher income dropped to 7%.
What This Means For The Housing Market
These shifts in sentiment reflect ongoing affordability challenges in the housing market. Despite some respondents feeling more optimistic about buying, the overall sentiment continues to reflect concerns about high home prices and mortgage rates. As Fannie Mae’s data shows, consumers are still grappling with affordability and uncertainty, especially given the limited supply and high home prices.
"We continue to expect home sales activity to remain relatively light over our forecast horizon due to the ongoing lack of supply and overall unaffordability," Palim said.
