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A Fannie Mae index that measures shopper sentiment in regards to the housing market rose final month to the best degree in additional than two years, as mortgage charges hit a 2024 low and a report variety of Individuals mentioned they anticipated charges to maintain coming down.
However greater than eight in 10 Individuals nonetheless noticed September as a foul time to purchase a house, and mortgage charges have been climbing once more since Fannie Mae performed the month-to-month survey on which the index relies.
Fannie Mae’s Residence Buy Sentiment Index (HPSI), which distills six questions from the mortgage large’s month-to-month Nationwide Housing Survey (NHS) right into a single quantity, climbed to 73.9 in September, up 1.8 factors from August and 9.4 factors from a yr in the past.
“Although most consumers continue to think it’s a ‘bad time’ to buy a home, the recent shift in attitude toward mortgage rates is pushing overall housing sentiment higher, and a growing share are now pointing to high home prices rather than high mortgage rates as the primary sticking point for affordability,” Fannie Mae Chief Economist Mark Palim mentioned in a assertion Monday.
Supply: Fannie Mae Nationwide Housing Survey, September 2024.
4 of the HPSI’s six elements improved in September, together with mortgage price outlook, shopping for circumstances and alter in family revenue.
Mark Palim
“Increased positivity that mortgage rates will continue to fall has driven the HPSI to a 30-month high, but we’ve yet to see consumers’ newfound rate optimism translate into a meaningful increase in home sales activity,” Palim mentioned.
“Instead, as we noted in our latest housing forecast, existing home sales are on pace to record their lowest annual total since 1995. This signals to us that consumers are paying attention to the easing interest rate environment but still feel stymied by the considerable run-up in home prices over the last four years.”
Supply: Fannie Mae Nationwide Housing Survey, September 2024.
The fourth HPSI element that improved — house worth outlook — would possibly find yourself proving to be a detrimental for house gross sales if shoppers’ expectations are realized.
Three out of 4 shoppers surveyed in September count on house costs will both go up within the subsequent 12 months (39 p.c) or keep the identical (37 p.c).
Solely 23 p.c of these surveyed count on house costs to go down within the subsequent 12 months, down from 25 p.c in August.
However the HPSI tallies a rise in shopper sentiment that house costs will go up as a optimistic for housing sentiment as a result of it suggests would-be consumers and householders are extra assured that properties will maintain their values.
Supply: Fannie Mae Nationwide Housing Survey, September 2024.
Greater than 4 in 10 shoppers surveyed in September (42 p.c) mentioned they count on mortage charges to go down over the following 12 months, a brand new survey excessive in information courting to 2010. Whereas the share who mentioned they count on charges to go up additionally elevated by a share level, the web share of these anticipating mortgage charges to go down was up two share factors, to fifteen p.c, additionally a report excessive.
Whereas forecasters do count on that charges will come down in the long term, they’ve been headed in the wrong way for the reason that Nationwide Housing Survey was fielded.
Final month’s survey of 1,038 family monetary decision-makers was performed between Sept. 1 and Sept. 19, as mortgage charges have been falling to their lowest level of the yr.
Mortgage charges on the rebound
Since hitting a 2024 low of 6.03 p.c on Sept. 17, charges on 30-year fixed-rate mortgages have bounced again, averaging 6.27 p.c on Friday based on rate-lock knowledge tracked by Optimum Blue.
Charges have been on the rise for the reason that Federal Reserve accepted its first price lower in 4 years — a dramatic 50 basis-point discount within the federal funds price — on Sept. 18.
That’s as a result of traders who fund most mortgages had already priced that transfer in, and since Fed policymakers signaled they might take a cautious strategy in making additional cuts.
The rebound in mortgage charges accelerated Friday with the discharge of a blowout jobs report that bolstered expectations that the Fed received’t transfer aggressively at future conferences to convey charges down.
Supply: Fannie Mae Nationwide Housing Survey, September 2024.
At the same time as mortgage charges have been hitting new 2024 lows in September, 81 p.c of these surveyed by Fannie Mae mentioned it was a foul time to purchase.
That’s down from 83 p.c in August, however nonetheless not removed from an all-time survey excessive of 85 p.c registered in October 2023, when mortgage charges have been hitting post-pandemic highs.
Breaking out sentiment amongst renters, Palim mentioned that during the last three months, the share of renters believing it’s an excellent time to purchase has risen from 13 p.c to twenty p.c, and the share anticipating mortgage charges to fall has risen from 16 p.c to 30 p.c.
“While these numbers are still relatively low, we think the improvement may signal that some potential homebuyers who have been waiting for mortgage rates to come down may be closer to coming off the sidelines, despite their ongoing concerns about home prices,” Palim mentioned.
The share of shoppers who say they might purchase a house relatively than hire remained unchanged at 68 p.c.
Supply: Fannie Mae Nationwide Housing Survey, September 2024.
Whereas 65 p.c of these surveyed in September mentioned it was an excellent time to promote, the share who mentioned it was a foul time to promote elevated by one share level from August to 35 p.c. The online share of those that mentioned it was an excellent time to promote fell 1 share level from August to September, to 30 p.c.
Many owners considering a transfer are reluctant to surrender the low price on their present mortgage, a dilemma that’s been dubbed the lock-in impact.
“With the majority of homeowners locked into low mortgages, rates will need to keep falling consistently for many to feel comfortable moving on from the deals they secured years ago,” Redfin Senior Economist Elijah de la Campa mentioned of a latest evaluation that discovered houses are turning over this yr on the lowest price in 30 years.
The opposite element of the HPSI that deteriorated from August to September was job loss concern. The proportion of respondents saying they’re involved about dropping their job rose by a share level from August to September, to 22 p.c.
Though not factored into the HPSI, the share of those that mentioned they suppose the financial system is heading in the right direction rose two share factors from August to 32 p.c — a 4 p.c improve from a yr in the past.
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