After falling to near-survey lows in recent months, the Fannie Mae Home Purchase Sentiment Index (HPSI) rebounded in April to reach its highest level since May 2022.
The HPSI increased 5.5 points to a reading of 66.8, boosted by improving sentiment and expectations toward mortgage rates. On a year-over-year basis, the index is down 1.7 points.
“This month’s increase in the HPSI was the largest in over two years, primarily driven by consumers’ more optimistic mortgage rate expectations,” says Fannie Mae senior vice president and chief economist Doug Duncan. “An increased number of respondents indicated they think mortgage rates will go down over the next year, a belief that could be due to a combination of factors, including an awareness of decelerating inflation, market suggestions that monetary conditions will ease in the not-too-distant future, and, of course, actual mortgage rate declines during the month.”
All six of the HPSI’s components improved month over month in April, with the largest increase in sentiment associated with expectations of mortgage rates. While the mortgage rate component remains negative on net—meaning more respondents expect mortgage rates to go up over the next year than decrease—22% of consumers indicated they expect mortgage rates to go down compared with 12% a month ago.
Affordability constraints continue to hinder overall home buying sentiment, according to Fannie Mae. Only 23% of respondents indicated it is a good time to buy a home, while 62% of respondents reported it is a good time to sell a home.
Approximately 37% of respondents said they believe that home prices will increase over the next 12 months, while 32% said they expect prices to decrease.
“The bump in optimism may prove temporary, as consumers continue to report uncertainty about the direction of home prices—and we know that high home prices remain the primary reason given by consumers who think it’s a bad time to buy a home,” Duncan says. “Until affordability improves for a larger swath of the home buying public, we believe home sales will remain subdued compared to previous years.”
Nearly 80% of respondents reported not being concerned about losing their job in the next 12 months, while the net share of those whose household income is significantly higher than it was 12 months ago increased 4 percentage points month over month.
The HPSI combines information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey into a single number. The HPSI reflects current and forward-looking expectations of housing market conditions and complements existing data sources.
