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Fannie Mae’s March survey released on Monday showed dwindling hopes that mortgage rates will fall over the next 12 months, denting consumer confidence in housing market conditions for the first time since November.
Fannie Mae’s Home Buying Confidence Index takes six questions from the mortgage giant’s broader monthly National Housing Survey and distills them into a single number.
The index fell 0.9 points in March to 71.9, although the share of consumers who said March was a good time to buy or sell rose slightly, with most homeowners and renters saying they were confident home prices would not rise. crashed.
Three other components of the index – unemployment concerns and the outlook for household income and mortgage rates – fell, pushing the overall index down 1%.
Doug Duncan
“The HPSI remained relatively flat in March, but we are seeing signs that consumers may be adjusting their expectations for the housing market to better adjust to higher prices,” Fannie Mae chief economist Doug Duncan said in a note. the mortgage rate and house price environment.” statement This had a positive impact on the numbers.
Despite the dip in sentiment, a majority of Americans surveyed in March (68%) said they would try to buy a home rather than rent if they were to move, consistent with past surveys.
“We noted in our latest monthly forecast that we expect a gradual increase in home listings and sales transactions in the coming year,” Duncan said. “We believe this will not only be driven by those on the sidelines due to interest rate-related realignments. , and is driven by families who may need to move for other life reasons.”
source: Fannie Mae National Housing SurveyMarch 2024.
Looking back one year, the Home Buying Confidence Index (HPSI) rose by 10.6 points. But the index still has a long way to go before it returns to pre-pandemic levels, when it regularly soared above 90.
Housing affordability continues to weigh on consumer confidence, with only 21% of people in the March survey saying now was a good time to buy a home.
That’s up two percentage points from February and seven points from November, when just 14% of consumers thought now was a good time to buy, an all-time low in surveys dating back to 2010.
source: Fannie Mae National Housing SurveyMarch 2024.
The proportion of consumers who believe that March is not suitable for purchasing fell from 81% in February to 79%, while the net proportion of consumers who believe that March is suitable for purchasing increased by 4 percentage points from the previous month to 58%.
source: Fannie Mae National Housing SurveyMarch 2024.
Tough conditions for buyers are often good news for sellers, with a Fannie Mae survey showing 66% of Americans thought March was a good time to sell, up from 65% in February compared with 58% a year ago.
The proportion who believed that March was not suitable for sale fell to 34%, while the net proportion who believed that March was suitable for sale increased by two percentage points month-on-month to 32%.
source: Fannie Mae National Housing SurveyMarch 2024.
The March survey showed that 40% of respondents expected home prices to rise in the next 12 months, 38% expected them to remain the same, and more than three-quarters of Americans had little concern about home prices rising anytime soon. will collapse.
The proportion expecting house prices to fall over the next 12 months fell to 20%, down from 23% in February and 31% a year ago.
While falling house prices may be welcomed by many potential homebuyers, the HPSI views expectations of lower house prices as a pessimistic sign. Therefore, a 1 percentage point increase in the net share of those who said they expected house prices to rise over the next 12 months had a positive impact on the index.
source: Fannie Mae National Housing SurveyMarch 2024.
The main factor driving the HPSI’s decline in March was the declining number of Americans who believe mortgage rates will fall over the next 12 months.
Only 29% of those surveyed in March said they expected mortgage rates to fall next year, down from 35% in February.
34% expect mortgage rates to rise, 36% expect mortgage rates to remain unchanged, and the net proportion expecting mortgage rates to fall over the next 12 months is down 8 percentage points from February to March. down to minus 5%.
Mortgage rates have been rising this spring, and worrisome inflation data have all but quelled speculation that the Federal Reserve could cut short-term interest rates by June. A rebound in mortgage rates, adjusting for seasonal increases that typically occur in the spring, has dented homebuyer demand for mortgages.
The 30-year fixed-rate mortgage rate has been hovering around 7% this spring, reaching 6.89% on Friday, according to data. best blue Rate lock information.That’s despite economists from Fannie Mae and the Mortgage Bankers Association still predicting Mortgage rates will fall Over the next 12 months, the decline may not be as rapid or as dramatic as previously predicted.
in a Forecast for March 21MBA economists predict that 30-year fixed-rate mortgage rates will fall to 6.1% by the end of this year and average 5.6% in the fourth quarter of 2024. In forecasts released in March, Fannie Mae economists said they did not expect 30-year fixed-rate loan rates to reach 6% by the fourth quarter of 2025.
“The historically low interest rates of the pandemic era are now firmly in the past and some households appear to be overcoming the hurdles of last year’s sharp rate hikes, a correction we believe could help further thaw the housing market,” Duncan said on Monday.
Although not included in HPSI’s calculations, Fannie Mae’s March survey showed 58% said they thought it would be difficult to get a mortgage, up from 54% in February and 52% a year ago.
source: Fannie Mae National Housing SurveyMarch 2024.
While only 23% of Americans in Fannie Mae’s March survey said they were worried about losing their jobs, that was up from 22% in February and 21% a year ago. The net share who said they were not worried about losing their jobs fell by two percentage points from February to March, weakening the overall home-buying confidence index.
source: Fannie Mae National Housing SurveyMarch 2024.
A slight increase in the share of consumers who said their household income was significantly lower than a year ago also weighed on the index.
Twelve percent reported a decrease in income, while the share saying an increase remained unchanged at 19%, so the net share of consumers reporting a significant increase in household income fell by two percentage points from February to March.
source: Fannie Mae National Housing SurveyMarch 2024.
While a strong economy is one reason mortgage rates have rebounded this year, a March Fannie Mae survey showed 71% of Americans said they believed the economy was on the wrong track.
That’s up from 68% in February but down from the 2023 high of 78% set in October.
The HPSI does not take into account consumer confidence in the economy.
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