Fannie Mae Home Purchase Sentiment Index Declines in December

On Tuesday, Fannie Mae reported that its Home Purchase Sentiment Index (HPSI) fell 1.9 points in December, reaching a reading of 73.1.

Despite the decline, the HPSI remained substantially higher than year-ago levels, partly due to sustained optimism about mortgage rates. A plurality of consumers continues to expect mortgage rates to decline over the next 12 months; while December’s 42% share was lower than November’s 45%, it remains meaningfully improved compared to December of 2023’s 31%.

In a similar way, the shares expressing optimism toward homebuying and home-selling conditions, respectively, declined slightly month-over-month, but both components remain up year-over-year. Overall, the HPSI is up 5.9 points compared to a year earlier.

In remarks accompanying the report, Fannie Mae Senior Vice President and Chief Economist Mark Palim said:

“Even though the HPSI fell to end the year, consumer sentiment toward the housing market finished 2024 substantially above year-ago levels, attributable in part to respondents’ ongoing expectations that mortgage rates will decline. However, just over one-in-five consumers believe it is a ‘good time’ to buy a home—although that share has risen over the last year, too, after reaching an all-time low of 14% in 2023Q4. While respondents remain discouraged by the pandemic-era run-up in home prices and mortgage rates, the upward trend in homebuying sentiment in 2024 may reflect a slow acclimatization to the generally less-affordable market conditions. As noted in our recently published predictions-for-2025 forecast commentary, we expect a modest decline in mortgage rates, decelerating home price growth, and higher wage growth to improve the relative affordability of purchasing a home in the new year, though consumers’ experiences will likely differ depending on where they live. As such, we think home purchase opportunities will still require market savviness by would-be homebuyers in what is expected to remain, broadly speaking, a highly competitive housing market.”