Consumer confidence in the housing market climbed in September, achieving its highest point in two years. The Home Purchase Sentiment Index (HPSI) from Fannie Mae showed an index score of 73.9 for the month.
In the latest report, 42% of consumers expressed optimism that mortgage rates will drop in the next 12 months, a notable rise from 39% in August and 24% in June. However, many still expect home prices to increase in the coming year, which may offset the potential benefits of lower rates on affordability.
The survey also revealed a 19% increase in those who consider it a good time to buy a home compared to August. Meanwhile, the share of respondents who believe it’s a bad time to buy dropped slightly from 83% to 81%. On the selling side, 65% of respondents maintained that it’s a favorable time to sell, the same as August, while those who feel it’s a poor time to sell edged up by 1 percentage point to 35%.
Mark Palim, Senior Vice President and Chief Economist at Fannie Mae, remarked, “While many people still see buying a home as a challenge, shifting attitudes about mortgage rates are driving more positive sentiment in the housing market. High home prices are now viewed as the primary barrier to affordability, instead of high mortgage rates. Even with increased optimism about falling rates, we have yet to see a corresponding rise in home sales. Existing home sales are projected to hit their lowest annual figure since 1995, signaling that although consumers are aware of the easing rate environment, they remain concerned about the steep rise in home prices over the last few years.”
Palim also pointed out a shift in sentiment among renters, who are often prospective first-time buyers. Over the past three months, the percentage of renters who believe it’s a good time to buy a home grew from 13% to 20%, while those expecting a drop in mortgage rates increased from 16% to 30%. Although these percentages are still relatively low, the improvement could suggest that more potential buyers are preparing to enter the market, despite ongoing concerns about high home prices.