Declining Mortgage Rates Fail to Assure Homebuyers

Mortgage rates may be cooling their climb — with further to fall — but homebuyers aren’t quite convinced about the improved state of the housing market.

Optimism on the future of mortgage rates surged, but a consensus of survey respondents said it’s not a good time to be buying a home, according to Fannie Mae’s monthly Home Purchase Sentiment Index.

A lack of supply and affordable options are driving overall pessimism, Fannie Mae vice president Mark Palim said in a statement.

The HPSI is up 5.2 points from a year ago, marking improved sentiment from 2023, but not compared to July.

Only 17 percent of survey respondents said it was a good time to buy a home, the same share as the previous month. The percentage of respondents who said it was a good time to sell also held steady from July at 65 percent.

The biggest shift from month to month pertained to expectations around mortgage rates. The share of respondents who thought rates would decrease in the next 12 months surged from 29 percent to 39 percent, perhaps buoyed by the falling rates of today and the potential of falling rates should the Federal Reserve act on its seeming plan to cut interest rates as soon as this month.

The net share of those who said mortgage rates would decrease — considering those who felt the opposite or expected them to hold steady — jumped to 13 percent. That represents a record high for the survey.

Home price expectation shifts were more moderate. The percentage who expected home prices to decline in the next 12 months increased from 21 percent to 25 percent, while the percentage who expected home prices to increase dropped from 41 percent to 37 percent.

Notably, the sentiment around whether it’s a good time to sell declined in the South, but increased in the other regions tracked by the index, which Palim said was likely a reflection on “wide geographic variation in new home construction activity.”