The Fannie Mae Home Purchase Sentiment Index® (HPSI) increased by 0.4 points in November to 75, marking a significant year-over-year rise in consumers' feeling about homebuying driven by optimism that mortgage rates will decrease.
A record number of consumers expect mortgage rates to fall, and fewer anticipate rising home prices. Although only 23% of respondents view the present as a “good time to buy,” this marks considerable improvement from last year’s 14%. The share of those believing it's a "good time to sell" remained stable, but also showed year-over-year growth.
Fannie Mae Chief Economist Mark Palim highlighted that this sentiment improvement continues a two-and-a-half-year trend, despite high mortgage rates and home prices.
Most mortgage industry analysts expect mortgage rates to end 2025 in the low 6s, keeping affordability at the forefront of lenders’ minds, their eyes on the December 18-19 Federal Reserve meeting next week.
“Over the past year, we have seen a significant improvement in general consumer sentiment toward the housing market, largely driven by increased optimism that mortgage rates will fall and improved perceptions of both homebuying and home-selling conditions,” said Palim.
After a spike in home prices during the pandemic, improvements in consumers' market outlook can be attributed to a “slow-but-steady acclimation to current market conditions.” And while consumers are adapting to these market conditions, high prices and mortgage rates continue motivating the perception that now is a “bad time to buy.”
As consumers adjust to new market realities, many expect their financial situation to improve and home price growth to slow, which could help ease affordability challenges and encourage homebuyers.
Last month, the government-sponsored enterprise (GSE) reported that it did not expect consumers' increased optimism to last, given forecasts of mortgage rates that will remain stubbornly high and uncertain policy shifts from the incoming Trump administration.
The Mortgage Bankers Association (MBA) reported this morning that mortgage credit availability declined sharply in November, as investors pulled back from high loan-to-value (LTV) and low-credit-score loans and industry consolidation continued.
