The Home Purchase Sentiment Index (HPSI) saw a decrease of 1.9 points in December to 73.1, yet remains substantially higher than year-ago levels, influenced by ongoing optimism regarding mortgage rates. Currently, 42% of consumers expect a decline in mortgage rates over the next 12 months, although this is a slight drop from November's 45%. Comparatively, December 2023 recorded only 31%, indicating a clear improvement in consumer optimism over the past year.
Mark Palim, Fannie Mae’s vice president and chief economist, indicated that despite the HPSI falling at the year's end, general sentiment towards the housing market is significantly improved compared to the previous year. This ongoing optimism, driven by expected declines in mortgage rates, has contributed to a rise in homebuying sentiment, even as consumers still grapple with the impact of increased home prices and mortgage rates from the pandemic.
In December 2024, the net share of respondents who feel it is a good time to buy saw a decrease from November, dropping to 22%, while those who view it as a bad time rose slightly to 78%. The overall sentiment reflects a modest yet concerning trend, where the majority remain cautious about entering the housing market, indicative of the uncertain economic conditions impacting affordability.
Fannie Mae projects that in the new year, a modest decline in mortgage rates, combined with decelerating home price growth and enhancing wage growth, could improve home purchase affordability. This suggests that while current market conditions continue to pose challenges, favorable changes may emerge that could restore confidence among potential home buyers, making the market more accessible in the near future.
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