Consumer confidence about mortgage interest rates is better than last year
Fannie Mae‘S Sentiment index for home purchases (HPSI) fell 1.9 points to 73.1 in December – a figure substantially higher than a year ago’s level, reflecting continued optimism about mortgage rates.
The index reported that consumers continue to expect mortgage rates to decline over the next twelve months. In December 2024, the share of consumers expecting a decline in mortgage rates remained stable at 42%, down from 45% in November. However, the measure has improved compared to the 31% of December 2023.
Stocks expressing optimism about home buying and home sales conditions fell slightly month-over-month, but both components continue to rise year over year. Overall, the HPSI is up 5.9 points compared to this time last year.
“Although the HPSI declined at the end of the year, consumer confidence about the housing market ended 2024 substantially above year-ago levels, partly due to respondents’ continued expectations that mortgage rates will decline,” it said. Mark Palim, vice president and chief economist. at Fannie Mae.
“However, just over one in five consumers believe it is a ‘good time’ to buy a home – although that share has also risen over the past year, following an all-time low of 14% in the fourth quarter by 2023. remain discouraged by the pandemic-era rise in home prices and mortgage rates, the upward trend in homebuying sentiment in 2024 could reflect a slow adjustment to generally less affordable market conditions.”
Palim went on to say that Fannie Mae expects that “a modest decline in mortgage rates, slowing home price growth and higher wage growth will improve the relative affordability of purchasing a home in the new year.”
The percentage of respondents saying it is a good time to buy a home has fallen slightly from 23% in November 2024 to 22%. Those saying it’s a bad time to buy rose from 77% to 78%, month-on-month. The net share of those saying it’s a good time to buy fell 3 percentage points month on month to -57%.
The share of respondents saying it’s a good time to sell a home fell from 64% to 63%, while the share saying it’s a bad time to sell rose from 35% to 36%.
Respondents who believe house prices will rise over the next twelve months remained unchanged from 38% in November. On the other hand, those who believe that house prices will fall have increased from 25% to 27%. The share that thinks house prices will remain the same fell from 36% to 35%.
