Fannie Mae’s January Home Purchase Sentiment Index Hits Highest Reading Since March 2022

On Wednesday, Fannie Mae reported that its Home Purchase Sentiment Index® (HPSI) rose 3.5 points in January to a reading of 70.7. Year-over-year, the full HPSI is up 9.1 points.

The January reading is at its highest since March 2022. Fannie Mae attributes the upward HPSI momentum to an increase in consumer confidence in job security and another significant jump in the share of consumers expecting mortgage rates to decrease.

In January, 82% of consumers surveyed indicated that they are not concerned about losing their jobs in the next 12 months, up from 75% which was reported in December. Additionally, an all-time survey-high 36% of respondents indicated that they expect mortgage rates to go down in the next 12 months, while 28% of survey respondents expected mortgage rates to go up and 35% expected mortgage rates to remain the same. On the other hand, consumer perceptions of homebuying conditions remains overwhelmingly pessimistic, with only 17% of survey respondents indicating it’s a “good time to buy” a home.

In remarks accompanying the release of the January HPSI, Fannie Mae Senior Vice President and Chief Economist Doug Duncan said,

“Mortgage rate optimism increased markedly again in January, with a survey-high percentage of consumers anticipating mortgage rate declines over the next year. 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. Consumers also expressed greater confidence in their job situations this month, another sign that housing sentiment may continue to improve in 2024.

However, 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. A large majority still think home prices will either increase or stay the same; the ‘good time to buy’ component continues to hover near its historical low; and fewer than one-in-five respondents indicated that their household income was significantly higher year over year, matching a survey low. All in all, while a lower mortgage rate path supports our forecast for a gradual increase in housing demand and sales activity in 2024, until we see a meaningful increase in housing supply, we expect affordability will remain a significant barrier to homeownership for many households.”