Rate Cooldown Boosts Consumer Optimism For 2024

The mortgage rate cooldown is giving Americans a somewhat rosier view of 2024’s housing market, sparking some optimism despite overall dour views about the state of buying and selling.

That’s according to Fannie Mae’s Home Purchase Sentiment Index, which increased 2.9 points in December to a reading of 67.2.

Though Americans generally see homebuying in a negative light, cooling rates pushed the “good time to buy” component of Fannie’s index up slightly month-over-month to 17%. That’s up from 14% in November, a survey low.

The boost was the result of a record-high number of consumers saying they expect mortgage rates to fall in the next 12 months (31%). 

“This significant shift in consumer expectations comes on the heels of the recent bond market rally and an already-significant downtick in 30-year mortgage rates, from their high of nearly 8% in early November to 6.62% as of this past week,” said Mark Palim, Vice President and Deputy Chief Economist at Fannie Mae.

“Notably, homeowners and higher-income groups reported greater rate optimism than renters; in fact, for the first time in our National Housing Survey’s history, more homeowners, on net, believe mortgage rates will go down than go up.”

However, an equal share of respondents said they expect rates to rise again (31%), and slightly more respondents think they’ll stay the same (36%), suggesting Americans are still wary they’ll be ultimately disappointed in their house hunts.

Plus, even if mortgage rates do continue slipping, elevated home prices and stock shortages are sure to keep market activity stifled, and consumers know that. Though the share of consumers who think home prices will go up fell slightly, they still overwhelm those who think prices will fall (39% and 24%, respectively.)

But Palim noted that homeowners are more concerned with mortgage rates than any other metric for both buying and selling. Decreases may still spark movement in the market in 2024 even if prices remain high and inventory low.

“Homeowners have told us repeatedly of late that high mortgage rates are the top reason why it’s both a bad time to buy and sell a home, and so a more positive mortgage rate outlook may incent some to list their homes for sale,” Palim said. “Of course, that’s likely dependent on the extent to which mortgage rate expectations are met with actual mortgage rate declines.”

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