Housing Sentiment Jumps To Highest Level Since March 2022

Consumer sentiment in housing rose in January to the highest level in nearly two years, as people felt more confident about their jobs and expected mortgage rates to fall.

The sentiment was measured by a monthly survey by Fannie Mae. The monthly Home Purchase Sentiment Index rose 3.5 points in January to 70.7—the highest level since March 2022. The HPSI uses information from Fannie Mae’s National Housing Survey, which goes back to 2010.

The increase was primarily due to increased consumer confidence about job security, as well as a jump in the share of consumers who expect rates to fall, the government-sponsored enterprise said on Wednesday.

In January, 82% of the survey respondents said they were not concerned about losing their job in the next 12 months, up from 75% the previous month.

The share of respondents who expect mortgage rates to go down in the next 12 months hit an all-time high of 36%, Fannie Mae said, up from 31% the previous month. The 30-year fixed-rate mortgage is averaging at 6.63% as of Feb. 1, according to Freddie Mac.

“For the first time in our National Housing Survey’s history, a greater share of consumers believe mortgage rates will decrease over the next year, rather than increase,” Doug Duncan, chief economist and senior vice president at Fannie Mae, said in a statement.

“Consumers also expressed greater confidence in their job situations this month, another sign that housing sentiment may continue to improve in 2024,” he added.

Still, consumers were pessimistic about home-buying conditions. The share of consumers who said it’s a good time to buy a home was only 17%, unchanged from the previous month.

But home sellers are growing optimistic about the market, with the share of those noting it’s a good time to sell rising to 60% from 57% from the previous month.

A smaller share of respondents said they believe home prices will go up in the next 12 months, falling to 37% from 39%.

The median price of a resale home in November was $382,600, according to the National Association of Realtors.

With rates falling, the biggest concern for the housing market still is whether there will be more homes for sale. Low inventory has led to buyers converging on a limited pool of resale homes, pushing up home prices.

“While home affordability may improve if actual mortgage rates continue moving downward, other parts of the affordability equation have yet to ease or improve for consumers,” Duncan said.

So “until we see a meaningful increase in housing supply, we expect affordability will remain a significant barrier to homeownership for many households,” he added.