Housing sentiment jumps to highest level in over two years, Fannie Mae says
By Aarthi Swaminathan
Sales of existing homes are expected to record their lowest annual total since 1995, Fannie Mae says
In the housing market, it seems like what goes down must come up.
Housing sentiment has improved significantly, with a record share of consumers optimistic about mortgage rates falling over the next 12 months, a new survey by Fannie Mae found.
But an increasing share are also expecting home prices to increase.
In September, the share of respondents who said they expect mortgage rates to go down in the next 12 months rose to 42% from 39% the previous month, according to a monthly survey by housing-finance giant Fannie Mae (FNMA).
The share of respondents who expect home prices to go up over the same period also increased, to 39% from 37%.
Despite the outlook over home-price growth, the big surge in optimism over rates pushed sentiment about the housing market up to the highest level in over two years. Fannie Mae's monthly Home Purchase Sentiment Index rose 1.8 points in September to 73.9. The HPSI uses information from Fannie Mae's National Housing Survey, which goes back to 2010.
The last time the index was at this level was in February 2022. That was right before the Federal Reserve began raising its benchmark interest rate in March 2022, which pushed up the 30-year mortgage rate over the next two years.
As rates fall due to the Fed starting to ease monetary policy in September, "a growing share are now pointing to high home prices rather than high mortgage rates as the primary sticking point for affordability," Mark Palim, chief economist at Fannie Mae, said in a statement.
Even though consumers are happy about the drop in mortgage rates in the coming months, home-sales activity remains muted, he said. Fannie Mae expects existing-home sales to be 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," he said, "but still feel stymied by the considerable run-up in home prices over the last four years."
The median price of an existing home in August was $416,700, according to the National Association of Realtors. That's up 3.1% from a year ago.
Only two in 10 respondents said that they believe it's a good time to buy a house, while 83% maintain that it's a bad time to buy.
Sellers are still feeling upbeat about the market, with 65% saying it's a good time to sell.
-Aarthi Swaminathan
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10-07-24 0916ET
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