Homebuyers' Confidence Improved in April by the Most in 2 Years

Americans' confidence about the housing market rose by the most in April in two years, according to Fannie Mae's index of homebuyer sentiment, as a growing number of would-be homebuyers said they expect mortgage rates to decline over the next year.

While a majority of respondents to Fannie Mae's survey expect mortgage rates to rise over the next year, a growing minority—22%—said they expect them to fall. That's up from just 12% in March.

The Home Purchase Sentiment Index jumped in April by 5.5 points to 66.8, its highest level since May 2022.

“This month’s increase in the HPSI was the largest in over two years, primarily driven by consumers’ more optimistic mortgage rate expectations,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.

“An increased number of respondents indicated they think mortgage rates will go down over the next year, a belief that could be due to a combination of factors, including an awareness of decelerating inflation, market suggestions that monetary conditions will ease in the not-too-distant future, and, of course, actual mortgage rate declines during the month,” Duncan said.

Still, high home prices and rates are keeping many homebuyers out of the market. The multifamily sector is continuing its growth as a result, and would-be buyers are locked in to their lower mortgage rates, stifling inventory. 

Home prices dampen the market

Only 23% of respondents said they think it is a good time to buy a home, though March is historically the peak of the market. That's largely because there just aren't enough homes for sale. Pending home sales dropped in March for the first time since November 2022, according to the National Association of Realtors. From March 2022, pending transactions dropped by 23.2% with year-over-year losses in all four of the nation’s regions.

A large number of respondents to the Fannie Mae survey said they think home prices will drop over the next year. 

By the end of April, the median home price was $368,918, down 2.7% from a year earlier, according to data from Redfin. April brought the 10th straight four-week period of declines. But Americans aren’t optimistic conditions will improve for them soon, according to Fannie Mae. 

“The bump in optimism may prove to be temporary, as consumers continue to report uncertainty about the direction of home prices—and we know that high home prices remain the primary reason given by consumers who think it’s a bad time to buy a home," Duncan said.

"Until affordability improves for a larger swath of the homebuying public, we believe home sales will remain subdued compared to previous years,” he added. 

The monthly mortgage payment on the median-asking price home was $2,555, just shy of the $2,557 record hit during the prior week. 

Mortgage purchase applications during the week ending April 28 dropped 2% from the week before.

The improved sentiment for the housing market is also good news for brokers such as Compass (COMP) and Douglas Elliman (DOUG), whose share prices have plunged over the last year as they struggle in a slow sales market.