February 25, 2024

Fannie Mae: Consumers Had Brighter Outlook on Mortgage Rates and Employment in January

Consumer sentiment toward the housing market improved significantly in January, rising to a score of 70.7 on Fannie Mae’s Home Purchase Sentiment Index (HPSI).

That’s mainly due to consumers’ much brighter outlook on mortgage rates, which are expected to gradually decrease through 2024.

The percentage of respondents who said mortgage rates will go down in the next 12 months increased to 36%, up from 31% in December.

“Mortgage rate optimism increased markedly again in January, with a survey-high percentage of consumers anticipating mortgage rate declines over the next year,” says Doug Duncan, senior vice president and chief economist for Fannie Mae, in a statement. “For the first time in our National Housing Survey’s history, a greater share of consumers believe mortgage rates will decrease over the next year, rather than increase.”

“Consumers also expressed greater confidence in their job situations this month, another sign that housing sentiment may continue to improve in 2024,” Duncan adds.

The percentage of respondents who said they are not concerned about losing their job in the next 12 months increased to 82%, up from 75% in December.

However, consumer perceptions of homebuying conditions remain overwhelmingly pessimistic, with only 17% of consumers indicating it’s a good time to buy a home.

“While home affordability may improve if actual mortgage rates continue moving downward, other parts of the affordability equation have yet to ease or improve for consumers,” Dun can says. “A large majority still think home prices will either increase or stay the same; the ‘good time to buy’ component continues to hover near its historical low; and fewer than one-in-five respondents indicated that their household income was significantly higher year over year, matching a survey low.”

“All in all, while a lower mortgage rate path supports our forecast for a gradual increase in housing demand and sales activity in 2024, until we see a meaningful increase in housing supply, we expect affordability will remain a significant barrier to homeownership for many households,” Duncan concludes.

Photo: Mohamed Nohassi

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