The Fannie Mae Home Purchase Sentiment Index (HPSI) decreased 0.9 points in March to 71.9, its first decline since November 2023, primarily due to increased pessimism about the direction of mortgage rates.
Thirty-four percent of consumers now believe that mortgage rates will go up over the next 12 months, up from 32% last month and more than the 29% who believe rates will decline. But amidst rate pessimism, consumer perceptions of both homebuying and home-selling conditions ticked up slightly again in March, and both measures have now risen multiple months in a row.
Overall, though, the lack of housing affordability continues to weigh on consumers’ belief that it’s a “good time to buy” a home, with only 21% agreeing with that particular sentiment. The full index is up 10.6 points year over year.
“The HPSI remained relatively flat in March, but we’re seeing signs that consumers may be adjusting their expectations for the housing market to better accommodate the higher mortgage rate and home price environment,” said Fannie Mae Senior Vice President and Chief Economist Doug Duncan.
At the start of the year, a number of housing experts were confidently forecasting rates to drop down to the 5's or 4's, but all consumers have seen thus far are mortgage rates increasing incrementally. Duncan explain that is why both measurements on whether its a good to buy or good time to sell continued their slow upward drift this month.
"With the historically low rates of the pandemic era now firmly behind us, some households appear to be moving past the hurdle of last year’s sharp jump in rates, an adjustment that we think could help further thaw the housing market," Duncan said. "We noted in our latest monthly forecast that we expect to see a gradual increase in home listings and sales transactions in the coming year. We believe this will be driven not only by those coming off the sidelines due to a rate-related recalibration but also by households who may need to need to move for other life reasons."
HPSI Highlights
The HPSI decreased in March by 0.9 points to 71.9. The HPSI is up 10.6 points compared to the same time last year.
- The percentage of respondents who say it is a good time to buy a home increased from 19% to 21%, while the percentage who say it is a bad time to buy decreased from 81% to 79%. As a result, the net share of those who say it is a good time to buy increased 4 percentage points month over month.
- The percentage of respondents who say it is a good time to sell a home increased from 65% to 66%, while the percentage who say it’s a bad time to sell decreased from 35% to 34%. As a result, the net share of those who say it is a good time to sell increased 2 percentage points month over month.
- The percentage of respondents who say home prices will go up in the next 12 months decreased from 42% to 40%, while the percentage who say home prices will go down decreased from 23% to 20%. The share who think home prices will stay the same increased from 34% to 38%. As a result, the net share of those who say home prices will go up in the next 12 months increased 1 percentage point.
- The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 35% to 29%, while the percentage who expect mortgage rates to go up increased from 32% to 34%. The share who think mortgage rates will stay the same increased from 32% to 36%. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased 8 percentage points month over month.
- The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 78% to 77%, while the percentage who say they are concerned increased from 22% to 23%. As a result, the net share of those who say they are not concerned about losing their job decreased 2 percentage points month over month.
- The percentage of respondents who say their household income is significantly higher than it was 12 months ago remained unchanged at 19%, while the percentage who say their household income is significantly lower increased from 11% to 12%. The percentage who say their household income is about the same decreased from 70% to 68%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 2 percentage points month over month.
