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Housing Confidence Increases with Upward Trend in HPSI

The Home Purchase Sentiment Index [1] (HPSI) published monthly by Fannie Mae [2] 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 [3], 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: