Consumer sentiment toward the housing market increased slightly in January compared with December, driven mainly by an increase in the number of consumers who expect home prices to rise over the next year, according to Fannie Mae’s Home Purchase Sentiment Index (HPSI).
The index – which is based on a consumer survey – increased 0.3 points in January to a score of 73.4, bouncing back slightly after falling in December for the first time since July.
However, there was 13-percentage-point decline in the net share of consumers who believe mortgage rates will go down in the next 12 months.
Year over year, the index is up 2.7 points.
“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,” says Kim Betancourt, vice president of multifamily economics and strategic research for Fannie Mae, in a statement. “The lower optimism toward the mortgage rate outlook was largely expected, as rates have continued to stay elevated and even crossed the 7 percent threshold in mid-January. As noted in our latest forecast, we currently expect mortgage rates to end 2025 around 6.5 percent, 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 says. “This mirrors our expectation that multifamily rents will grow between 2.0 percent and 2.5 percent this year — up from an estimated 1.0 percent 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.”
The percentage of survey respondents who say it is a good time to buy a home (22%) and the percentage who say it is a bad time to buy (78%) both stayed the same from last month.
The percentage who say it is a good time to sell a home (63%) and the percentage who say it’s a bad time to sell (36%) also remained unchanged month over month.
The percentage who say home prices will go up in the next 12 months increased from 38% to 43%, while the percentage who say home prices will go down decreased from 27% to 22%.
The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 42% to 35%, while the percentage who expect mortgage rates to go up increased from 25% to 32%.
Photo: Scott Webb