Fannie Mae’s Home Purchase Sentiment Index® Climbs Higher in April

Fannie Mae on Monday (5-8-23) released its Home Purchase Sentiment Index® (HPSI) for April. The HPSI increased in April to its highest level since May 2022, climbing 5.5 points to a reading of 66.8. Year-over-year, the full HPSI index is down 1.7 points.

Month-over-month, all six components of the HPSI increased, most notably the component associated with consumers’ expectations of mortgage rates. While the component remains net negative—meaning more respondents than not expect mortgage rates to increase over the year—in April, 22% of consumers indicated that they expect mortgage rates to move lower, compared to 12% in March.

The HPSI also highlights how affordability constraints continue to hinder overall homebuying sentiment, with only 23% of respondents indicating it is a good time to buy a home, although a majority once again believe that home prices will increase over the next 12 months.

Adding additional background and his analysis to the report, Fannie Mae’s Senior Vice President and Chief Economist Dr. Doug Duncan said:

“This month’s increase in the HPSI was the largest in over two years, primarily driven by consumers’ more optimistic mortgage rate expectations. An increased number of respondents indicated they think mortgage rates will go down over the next year, a belief that could be due to a combination of factors, including an awareness of decelerating inflation, market suggestions that monetary conditions will ease in the not-too-distant future, and, of course, actual mortgage rate declines during the month.

However, the bump in optimism may prove to be temporary, as consumers continue to report uncertainty about the direction of home prices—and we know that high home prices remain the primary reason given by consumers who think it’s a bad time to buy a home. Until affordability improves for a larger swath of the homebuying public, we believe home sales will remain subdued compared to previous years.”