With broader consumer confidence declining in January, the latest update to the Fannie Mae Home Purchase Sentiment Index (HPSI) shows an increase of 0.3 points in January to 73.4, marking a slight recovery after homebuying sentiment fell last month for the first time since July.
Improved optimism toward both homebuying and home-selling conditions, along with even greater expectations that home prices will rise throughout 2025, drove the small increase.
“Consumers seem increasingly pessimistic that housing affordability conditions will improve across the board, as a growing share expects home prices, rent prices, and mortgage rates will all go up,” said Kim Betancourt, Vice President of Multifamily Economics and Strategic Research.
After a surge in mortgage rate optimism in the second half of 2024, the net share of consumers who believe mortgage rates will go down in the next 12 months declined 13 percentage points in January 2025.
In addition, the share of consumers who expect rental prices to go up increased 8 percentage points from last month to 65%. Compared to last year, the HPSI is up 2.7 points.
“The lower optimism toward the mortgage rate outlook was largely expected, as rates have continued to stay elevated and even crossed the 7% threshold in mid-January,” Betancourt added. “As noted in our latest forecast, we currently expect mortgage rates to end 2025 around 6.5%, relatively little changed from where we are today, which will likely continue to hinder relief for housing affordability and home sales activity.”
A Good Or Bad Time To Buy?
Respondents weighed in on whether or not they believe it’s a good time or bad time to purchase a home, and the pessimists (bad time) won in a landslide (78%) compared to the optimistic party (22%). Both showed the same results from the prior month.
However, the net share of those who say it is a good time to buy increased 2 percentage points from the previous month to -55%.
On the home selling front, 63% of respondents say it is a good time to sell a home while 36% say it’s a bad time to sell. Both were unchanged from the previous month.
But, the net share of those who say it is a good time to sell increased 1 percentage point month over month to 28%.
Home Price & Rate Expectations
Consumers were somewhat more optimistic about home prices in January, with the percentage of respondents believing home prices will increase in 2025 rising from 38% to 43%.
The optimistic party is losing support as the percentage of those who believe home prices will go down this year fell from 27% to 22%.
The neutral party, who believe home prices will stay the same, decreased from 35% to 34%. As a result, the net share of those who say home prices will go up in the next 12 months increased 9 percentage points from the month prior to 20%.
Fewer respondents think mortgage rates will go down in the next 12 months, decreasing from 42% to 35%. Some of those respondents moved into the pessimistic camp, with the percentage of respondents who think rates will rise in 2025 increased from 25% to 32%.
Others moved over to the neutral camp, which increased from 32% to 33%, believing rates will stay the same.
Job Security & Income
Respondents were also more optimistic about job security. The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 77% to 78%, and the same percentage of respondents (22%) remain worried about losing their jobs.
The net share of respondents who are optimistic about job security increased 2 percentage points month over month to 56%.
Likewise, household income has achieved some stability. The percentage who say their household income is significantly higher than it was 12 months ago remained at 17%. Yet, the percentage who say their household income is significantly lower declined from 11% to 9%.
Meanwhile, the percentage who say their household income is about the same increased from 70% to 73% — a new survey high.
As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased 2 percentage points month over month to 8%.
