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Homebuyer confidence improved in April by the most in two years


Americans’ confidence in the housing market rose the most in April in two years, according to Fannie Mae’s homebuyer sentiment index, as a growing number of potential homebuyers said they expect mortgage rates to fall next year .

Key findings

  • The home buying sentiment index jumped to its highest level since May 2022.
  • In April, 22% said they expected mortgage rates to fall.
  • Only 23% of the respondents believe that the moment is suitable for buying a home.

While a majority of respondents to the Fannie Mae survey expect mortgage rates to rise next year, a growing minority — 22 percent — say they expect them to fall. This is an increase from just 12% in March.

The home buying sentiment index jumped 5.5 points in April to 66.8, its highest level since May 2022.

“This month’s HPSI increase was the largest in more than two years, driven primarily by more optimistic consumer expectations for mortgage rates,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist.

“An increasing number of respondents indicated that they believe mortgage rates will decline in the coming year, a belief that may be due to a combination of factors, including awareness of slowing inflation, market assumptions that monetary conditions will ease in the not-too-distant future and, of course, an actual drop in mortgage rates during the month,” Duncan said.

Still, high prices and home prices are keeping many homebuyers out of the market. As a result, the multifamily sector continues to grow and prospective buyers are locked into their lower mortgage rates, suffocating inventory.

House prices are undercutting the market

Only 23% of respondents said they thought it was a good time to buy a home, even though March is historically the peak of the market. This is largely due to the fact that there simply aren’t enough homes for sale. Pending home sales fell in March for the first time since November 2022, according to the National Association of Realtors. Since March 2022, pending transactions are down 23.2% with year-over-year losses in all four regions of the country.

A large number of respondents to the Fannie Mae survey said they think home prices will fall in the coming year.

Through the end of April, the median home price was $368,918, down 2.7 percent from a year earlier, according to Redfin data. April brought the 10th consecutive four-week period of decline. But Americans are not optimistic, according to Fannie Mae, conditions for them will soon improve.

“The uptick in optimism may prove temporary as consumers continue to report uncertainty about the direction of house prices – and we know that high house prices remain the top reason given by consumers who think it’s a bad time to buying a home,” Duncan said.

“Until affordability improves for a greater proportion of homebuyers, we believe home sales will remain weak compared to previous years,” he added.

The monthly mortgage payment for a home with an average asking price was $2,555, down slightly from a record $2,557 the previous week.

Mortgage purchase applications in the week ending April 28 were down 2% from the previous week.

Improved sentiment about the housing market is also good news for brokers like Compass ( COMP ) and Douglas Elliman ( DOUG ), whose stock prices have fallen over the past year as they struggle in a sluggish sales market.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.