In September, Fannie Mae’s Home Purchase Sentiment Index increased by 1.8 points to 73.9, the highest level since early 2022. Prospective buyers have been emboldened by the falling mortgage rate environment of the last few months, and the share of respondents who say now is a good time to buy a home has increased 2 percentage points from August (to 19%) while the share who say now is a bad time to buy has fallen 2 percentage points (to 81%). This change, while far from a seismic shift, is welcome news to the residential real estate market after a lackluster summer in which sales trailed even an underperforming 2023. Meanwhile, the share of respondents who say now is a good time to sell a home remained at 65% for the third consecutive month.
Though lower mortgage rates appear to be the main factor driving buyer confidence (39% believe home prices will go up, an increase from 37% in August), September’s survey suggests that rates are not finished improving yet. 42% of respondents, an all-time high, believe that mortgage rates will go down in the next 12 months while just 27% believe that they will go up. Our revised 2024 forecast has mortgage rates around 6.5% by year-end, so with the most recent Freddie Mac rate at 6.12%, we’re a bit less optimistic about the final quarter of 2024. Timing the market is exceptionally difficult, so prospective home buyers should pay close attention to market rates and calculate their home budget based on existing data.
Expectations around the housing market were heating up right around the best time of year to buy a home, but survey respondents showed some mixed feelings about their financial situations and the economy as a whole. Just 31% of respondents expected their personal financial situation to get better in the next 12 months, down from 37% in August, while 16% expect it to get worse, up from 15% in August. Still over two-thirds of respondents feel that the economy is on the wrong track, as they have for the last 12 months. Despite this consternation, respondents show a strong preference for buying a home instead of renting: 68% say they would buy a home if they were going to move compared to 31% who say they would rent.
It’s no secret that prospective home buyers have faced serious challenges in the wake of the COVID-19 pandemic and recovery, and the HPSI floundering below 75 in recent years reflects that. September’s uptick in buyer confidence is a welcome change of pace, as the Fed’s rate cutting in recent months has made its way into the collective psyche of buyers. With home inventory rising, mortgage rates stabilizing, and listing prices falling, these newly energized buyers may find more options available to them within their budget in coming months.
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