Fannie Mae Home Purchase Sentiment Index Unexpectedly Declines in March

On Monday, Fannie Mae released its Home Purchase Sentiment Index® (HPSI) for March. The HPSI dropped for the first time since November 2023, declining 0.9 points to a reading of 71.9. Year-over-year, the HPSI is up 10.6 points.

Fannie Mae said the decline was primarily due to increased pessimism about the direction of mortgage rates. In March, 34% of consumers believed that mortgage rates will move higher over the next 12 months, up from 32% in February and more than the 29% who believe that mortgage rates will decline.

Despite the jump in pessimism toward rates, consumer perceptions of both homebuying and home-selling conditions ticked up slightly again in March, and both measures have now risen multiple months in a row. Overall, though, the lack of housing affordability continues to weigh on consumers’ belief that it’s a “good time to buy” a home, with only 21% agreeing with that sentiment.

In remarks and analysis accompanying the HPSI report, Fannie Mae Senior Vice President and Chief Economist Doug Duncan said:

“The HPSI remained relatively flat in March, but we’re seeing signs that consumers may be adjusting their expectations for the housing market to better accommodate the higher mortgage rate and home price environment. Both our ‘good time to buy’ and ‘good time to sell’ measures continued their slow upward drift this month. However, consumers took a slightly more pessimistic view on the likely direction of mortgage rates, likely reflecting the fact that actual mortgage rates have moved upward since the start of the year. With the historically low rates of the pandemic era now firmly behind us, some households appear to be moving past the hurdle of last year’s sharp jump in rates, an adjustment that we think could help further thaw the housing market. We noted in our latest monthly forecast that we expect to see a gradual increase in home listings and sales transactions in the coming year. We believe this will be driven not only by those coming off the sidelines due to a rate-related recalibration, but also by households who may need to move for other life reasons.”