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A growing number of Americans expect mortgage rates and home prices to come down in the year ahead, but fewer than one in five consumers polled by Fannie Mae last month thought August was a good time to buy a home.
Fannie Mae’s latest monthly National Housing Survey, fielded Aug. 1-19 to 1,044 households, showed the net share of consumers who think mortgage rates will go down over the next 12 months shot up 16 percentage points to a new survey high.
Most Americans still think home prices will keep rising or stay the same in the year ahead. But the net share who think home prices will go up fell by eight percentage points from July to August — an indication that consumers understand home price appreciation is decelerating in many markets and that prices have peaked in others.
Despite growing optimism about the future, only 17 percent of renters and homeowners surveyed in August thought last month was a good time to buy a home — unchanged from July, and not much better than the all-time low of 14 percent seen in May.
Mark Palim
“Despite significantly greater optimism that mortgage rates and home prices will move in a more favorable direction for potential homebuyers, most consumers remain apprehensive about the housing market and continue to point to the lack of affordability and supply as the chief reasons for their pessimism,” Fannie Mae Deputy Chief Economist Mark Palim said in a statement.
While 65 percent thought it was a good time to sell, they were much less likely to say that if they lived in the South (56 percent), where inventories of homes for sale are on the rise in many markets, than in the Northeast (80 percent), Midwest (70 percent) or West (66 percent).
Palim chalked regional differences to wide geographic variation in new home construction activity.
“In the regions that had a stronger construction response following the pandemic, our latest survey data suggest that sellers may be losing some of their negotiating power due to the increased supply,” Palim said. “That said, we also know from previous research that some potential homebuyers may be feeling additional pressure to move for non-financial reasons.”
Declining mortgage rates are likely to bring more listings onto the market as homeowners feel less constrained by the “lock-in effect” — the reluctance to sell a home mortgaged at a bargain basement rate.
Source: Fannie Mae National Housing Survey, August, 2024.
Fannie Mae’s Home Purchase Sentiment Index (HPSI), which distills six questions from the National Housing Survey into a single number, ticked up 0.6 points from July to August, to 72.1, up 5.2 points from a year ago.
Only two of six components of the HPSI improved — mortgage rate outlook and job loss concern (Fannie Mae considers a decline in sentiment about the prospects for future home price appreciation as a negative).
“On a national level, housing sentiment was largely unchanged in August despite some positive developments for affordability, including a meaningful decline in actual mortgage rates and an uptick in home listings in certain markets, particularly in the Sunbelt,” Palim said.
Data tracked by Optimal Blue showed rates on 30-year fixed-rate loans hitting a 2024 low of 6.22 percent Friday following the release of weak jobs reports last week.
While mortgage rates have now dropped more than a full percentage point from a 2024 high of 7.27 percent on April 25, economic forecasters see more room for rates to fall as the Federal Reserve pivots from fighting inflation to protecting jobs.
Economists at Fannie Mae and the Mortgage Bankers Association believe the Federal Reserve is on the verge of launching a rate-cutting campaign on Sept. 18 that will help bring rates on 30-year fixed-rate mortgages below 6 percent by the fourth quarter of 2025.
While mortgage rates have been falling steadily for three months, it’s taken a while for consumers to get the message.
Source: Fannie Mae National Housing Survey, August, 2024.
One in four consumers surveyed in August (26 percent) said they expected mortgage rates to go up in the year ahead, down from 31 percent in July and 47 percent last October, when rates were hitting post-pandemic highs.
With the percentage of respondents who said they expect mortgage rates to go down in the next 12 months jumping 10 percentage points, to 39 percent, the net share of those expecting rates to go down rose to 13 percent — the highest level in survey records dating to 2010.
Source: Fannie Mae National Housing Survey, August, 2024.
Most Americans agree that home prices will either fall (25 percent) or stay the same (37 percent) over the next 12 months. While 37 percent of consumers surveyed in August still thought home prices would keep going up in the year ahead, that’s down from 41 percent in July.
The net share of consumers who say home prices will go up decreased eight percentage points to 13 percent.
Source: Fannie Mae National Housing Survey, August, 2024.
With the percentage of respondents saying August was a good time to buy remaining unchanged from 17 percent in July, and the percentage who say it was a bad time to buy increasing to 83 percent, the net share of those who said August was a good time to buy decreased one percentage point month over month to -65 percent.
Source: Fannie Mae National Housing Survey, August, 2024.
While there was considerable variation by region, the net share who said August was a good time to sell was unchanged from July. With 65 percent saying August was a good time to sell and 34 percent saying it was a bad time, the net share saying it was a good time to sell was 31 percent.
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