In October, Fannie Mae’s Home Purchase Sentiment Index increased by 0.7 points to 74.6, nearly reaching the same level it was at for most of 2021 before cratering in 2022. The third consecutive month of increases in the index occurred in the context of mortgage rates slowly falling through September before their recent upswing, as the survey was primarily fielded in the first half of October. It also occurred prior to Donald Trump’s election on Tuesday, whose proposed policies and the perceptions around them we believe will add upward pressure to mortgage rates and home prices. Nevertheless, October’s survey included 20% of respondents saying that they believe now is a good time to buy a home, the highest level since April. Seller sentiment held steady, with 64% of respondents saying that now is a good time to sell a home. The improved outlook for homebuying may contribute to a pickup in sales activity in the short term, as many prospective buyers and sellers have been waiting for the election results before they make a move. We showed that 1 in 5 Americans were considering moving because they felt politically misaligned with where they currently live, and that millennials (the primary generation of first-time homebuyers right now) are the most likely to move for that reason.
The share of survey respondents who believe that mortgage rates will go up fell to 22% in October, the lowest level in at least three years. In reality, the Freddie Mac 30 year fixed mortgage rate bottomed out at 6.08% in the last week of September and then rose all five weeks of October, reaching 6.72% in the last weekly report before the election and 6.79% today. There is no indication that this growth will taper off any time soon, as the 10-year treasury yield jumped nearly 20 basis points on Election Day. The surging stock market is drawing investors out of bonds, lowering bond prices and increasing bond yields, which leads to higher mortgage rates as mortgage-backed securities have to yield higher returns to compete with other debt offerings. There is significant misalignment between homebuyer perceptions as quantified by this survey and the actual environment of home finance.
Expectations around home prices remained basically the same from the past few months, with 39% of respondents saying home prices will go up, 38% saying they’ll stay the same, and 23% saying they will go down. The median listing price in the United States was $424,950 in October, flat from last year as listing prices have remained stubbornly high even as the inventory of homes has recovered to near pre-pandemic levels. Now that the election has been decided, we expect home prices to increase further if Republicans follow through on their promises. New construction will be especially impacted by the proposed tariffs, which will increase material costs, and mass deportation, which will increase labor costs. Existing homes may see price increases due to tax cuts, which will enable more prospective buyers to enter the market with more cash in their pockets.
One of the more notable trends in the Home Purchase Sentiment Index over the past several months has been the respondents’ preferences between renting and buying their next home. The share of respondents who say they would rent a home if they were going to move increased to 36%, a new high-water mark for the HPSI, while the share who say they would buy their next home fell to 63%. Given the fact that nationwide rents have been falling year-over-year for 14 consecutive months and the cost of buying a home continues to rise, this is not much of a surprise. Affordability continues to be the primary driver of Americans’ decisions about where to live, and in the wake of the 2024 election it will be important for prospective buyers to reassess the market conditions that influence those decisions.
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