Consumer sentiment toward housing inched higher for a third consecutive month as respondents feel increasingly optimistic about home selling conditions.
Fannie Mae’s Home Purchase Sentiment Index (HPSI), which tracks the U.S. housing market and consumer confidence to buy or sell a home, rose 2.1 points in February to 72.8. The full index is up 14.8 points from one year ago.
In February, 65% of consumers said that conditions were ripe to sell a home, up from 60% in January. Conversely, only 19% of shoppers feel like the timing is right to buy a home, up from 17% in the prior month.
“The HPSI increased for the third straight month, continuing its slow but steady rise from the low-level plateau observed through much of 2023; and consumer sentiment toward housing now rests firmly above where it was this time last year,” Doug Duncan, Fannie Mae senior vice president and chief economist, said in a statement.
“Consumer attitudes toward home-selling conditions increased markedly in February, with current homeowners, in particular, expressing greater optimism that it’s a ‘good time to sell,’ a development that may foreshadow an upcoming increase in existing home listings.”
The housing industry expects mortgage rates to move down toward 6% as the Federal Reserve is expected to cut benchmark interest rates sometime this year. In its February Economic & Housing Outlook, Fannie Mae forecast the 30-year fixed mortgage rate to decrease to 5.9% by the end of 2024
Many consumers also remain hopeful that mortgage rates will go down over the next 12 months. If mortgage rates slide closer to the 6% mark by the end of the year, consumer sentiment on both sides of the transaction is likely to increase.
“A decline in mortgage rates — and the resulting uptick in sentiment — would obviously bode well for the upcoming spring homebuying season, although affordability will likely remain a significant challenge for buyers, at least until there’s a meaningful addition to net supply,” Duncan said.
Fannie Mae forecasts single-family mortgage origination volume at $1.92 trillion in 2024 and at $2.36 trillion in 2025, up from $1.50 trillion in 2023.
The agency also expects the annualized pace of existing home sales to increase to 5 million units in 2024, up from a 3.8-million-unit pace in Q4 2023.
