WASHINGTON—The Fannie Mae Home Purchase Sentiment Index (HPSI) increased 0.3 points in January to 73.4, bouncing back slightly after falling last month for the first time since July. Year over year, the HPSI is up 2.7 points.
Key data points:
- Improvements in consumer optimism toward both homebuying and home-selling conditions, along with even greater expectations that home prices will rise over the next 12 months, drove the increase.
- After a surge in mortgage rate optimism in the second half of last year, January saw a 13-percentage-point decline in the net share of consumers who believe mortgage rates will go down in the next 12 months.
- The share of consumers who expect rental prices will go up increased eight percentage points from last month to 65%.
“Consumers seem increasingly pessimistic that housing affordability conditions will improve across the board, as a growing share expects home prices, rent prices, and mortgage rates will all go up,” said Kim Betancourt, vice president of multifamily economics and strategic research at Fannie Mae. “The lower optimism toward the mortgage rate outlook was largely expected, as rates have continued to stay elevated and even crossed the 7% threshold in mid-January. As noted in our latest forecast, we currently expect mortgage rates to end 2025 around 6.5%, relatively little changed from where we are today, which will likely continue to hinder relief for housing affordability and home sales activity.”
“On the rental side, consumers have indicated a sharply growing expectation over the past two months that rent prices will increase,” Betancourt continued. “This mirrors our expectation that multifamily rents will grow between 2.0% and 2.5% this year — up from an estimated 1.0% last year. Even though it remains relatively cheaper for consumers to rent than buy in nearly every U.S. metro, we expect affordability issues will remain a real challenge for both renters and homeowners alike for the foreseeable future.”