Housing Confidence Increases with Upward Trend in HPSI

The Home Purchase Sentiment Index (HPSI) published monthly by Fannie Mae reported yet another increase to its highest level Since May 2022 mainly due to greater consumer optimism about mortgage rates. 

By the numbers, the HPSI rose 5.5 points to a total of 66.8—the index was benchmarked to 100 based on market activity in 2001. Year-over-year, the full index is down 1.7 points. 

The increase in the index was based on its six major components—of which all increased—most notably the component associated with consumers’ expectations of mortgage rates meaning that more respondents than not expect mortgage rates to go up over the next year. In April, 22% of consumers indicated that they expect mortgage rates to go down, compared to only 12% last month. Of course, affordability constraints continue to hinder overall homebuying sentiment, with only 23% of respondents indicating it’s a good time to buy a home. 

“This month’s increase in the HPSI was the largest in over two years, primarily driven by consumers’ more optimistic mortgage rate expectations,” said Doug Duncan, Fannie Mae’s SVP and Chief Economist. “An increased number of respondents indicated they think mortgage rates will go down over the next year, a belief that could be due to a combination of factors, including an awareness of decelerating inflation, market suggestions that monetary conditions will ease in the not-too-distant future, and, of course, actual mortgage rate declines during the month.” 

Duncan continued: “However, the bump in optimism may prove to be temporary, as consumers continue to report uncertainty about the direction of home prices – and we know that high home prices remain the primary reason given by consumers who think it’s a bad time to buy a home. Until affordability improves for a larger swath of the homebuying public, we believe home sales will remain subdued compared to previous years.” 

Component highlights of the HPSI as highlighted by Fannie Mae includes:  

•  Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased in March by 3.3 points to 61.3. The HPSI is down 11.9 points compared to the same time last year. 
• Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home remained unchanged at 20%, while the percentage who say it is a bad time to buy remained unchanged at 79%. As a result, the net share of those who say it is a good time to buy decreased one percentage point month over month (due to rounding).  
• Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home increased from 54% to 58%, while the percentage who say it’s a bad time to sell decreased from 44% to 40%. As a result, the net share of those who say it is a good time to sell increased eight percentage points month over month.  
• Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months increased from 30% to 32%, while the percentage who say home prices will go down decreased from 35% to 31%. The share who think home prices will stay the same increased from 33% to 35%. As a result, the net share of those who say home prices will go up increased four percentage points month over month.  
• Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 15% to 12%, while the percentage who expect mortgage rates to go up decreased from 55% to 51%. The share who think mortgage rates will stay the same increased from 28% to 34%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased one percentage point month-over-month. 
• Job Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 73% to 78%, while the percentage who say they are concerned decreased from 24% to 21%. As a result, the net share of those who say they are not concerned about losing their job increased seven percentage points month-over-month.  
• Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 22% to 20%, while the percentage who say their household income is significantly lower decreased from 12% to 11%. The percentage who say their household income is about the same increased from 63% 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 two percentage points month-over-month.