Americans’ confidence in the housing market rose by the most in two years in April, according to Fannie Mae’s homebuyer sentiment index, as a growing number of potential buyers said they expect mortgage rates to fall over the next year.
- The home buying sentiment index jumped to its highest level since May 2022.
- In April, 22% said they expected mortgage rates to fall.
- Only 23% of respondents think that it is a good time to buy a home.
While most respondents to the Fannie Mae survey expect mortgage rates to rise next year, a growing minority — 22% — said they expect them to fall. That’s up from just 12% in March.
An index of home buying sentiment jumped 5.5 points to 66.8 in April, the highest level since May 2022.
“This month’s increase in HPSI was the largest in more than two years, largely due to more optimistic consumer expectations about mortgage rates,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.
“A greater number of respondents said they think mortgage rates will fall over the next year, a belief that could be driven by a combination of factors, including awareness of slowing inflation, market suggestions that monetary conditions will ease in the not-too-distant future . -distant future and of course the real mortgage rate is going down during the month,” Duncan said.
Still, high home prices and rates are keeping many buyers out of the market. The multi-family sector is continuing its growth as a result and potential buyers are locked into their lower mortgage rates, choking inventory.
Home prices dampen the market
Only 23% of respondents said they thought it was a good time to buy a home, although March is historically the peak of the market. This is largely because there simply aren’t enough homes for sale. Pending home sales fell in March for the first time since November 2022, according to the National Association of Realtors. As of March 2022, backlog was down 23.2% with year-over-year losses in all four regions of the country.
A large number of respondents to a Fannie Mae survey said they think home prices will fall over the next year.
It will be until the end of April the median home price was $368,918, down 2.7% from the previous year, according to data from Redfin. April marked the 10th consecutive four-week period of decline. But Americans are not optimistic, according to Fannie Mae, conditions will soon improve for them.
“The uptick in optimism may prove temporary as consumers continue to report uncertainty about the direction of home prices – and we know that high home prices remain the top reason cited by consumers who think it’s not a good time to buy a home,” Duncan said.
“Until affordability improves for a larger portion of the homebuying public, we believe home sales will remain subdued compared to previous years,” he added.
The monthly mortgage payment the median asking price for a home was $2,555, just shy of the previous week’s record high of $2,557.
Purchase mortgage applications fell 2% in the week ending April 28 from the previous week.
Better sentiment in the housing market is also good news for brokers like Compass (comp) and Douglas Elliman (DOUG), whose share prices have fallen over the past year as they struggle in a sluggish sales market.