Consumers are growing more hopeful about a future decline in mortgage rates and home prices, but this optimism has not significantly boosted enthusiasm for buying homes, according to Fannie Mae’s latest Home Purchase Sentiment Index (HPSI).
The HPSI, which gauges consumer confidence in the housing market, edged up by 0.6 points to 72 in August, marking a 5.2-point increase compared to the same time last year. A record 39% of consumers now believe mortgage rates will drop within the next year, an increase from 29% in July. Additionally, 25% expect home prices to fall over the same period, up from 21% the previous month.
Despite these positive trends in affordability, the overall perception of homebuying conditions remains stagnant. Only 17% of respondents said August was a good time to buy a home, unchanged from previous months.
“National housing sentiment remained steady in August, despite encouraging signs for affordability, such as a notable drop in mortgage rates and increased home listings in some markets, particularly in the Sunbelt,” said Mark Palim, Fannie Mae’s vice president and deputy chief economist.
However, Palim highlighted regional disparities in consumer outlook on home selling. In the South, 56% of respondents said it was a good time to sell, a drop of five percentage points from July. This contrasts with higher selling confidence in other regions, including the Northeast (80%), Midwest (70%), and West (66%), where sentiment improved in August.
“This reflects the geographical differences in new home construction,” Palim explained. “Regions with more post-pandemic construction are seeing a shift in negotiating power toward buyers due to increased supply.”
Nationwide, housing starts for both single-family and multifamily units dropped in July compared to the previous year. Single-family home starts fell 14.1% from June and 14.8% year-over-year, with a seasonally adjusted annual rate of 851,000 units. Multifamily starts, while up 11.7% from June, were down 21.8% compared to a year earlier, according to data from the U.S. Census Bureau and the Department of Housing and Urban Development (HUD).
