Survey marks first time in 2025 that more Americans expect rates to drop than climb
For the first time this year, more Americans expected mortgage rates to fall than to rise, according to Fannie Mae’s latest Home Purchase Sentiment Index (HPSI).
The HPSI dipped by 0.4 points to 71.4 in August, with decreases in home price outlook, job loss concern, selling conditions, and household income more than offsetting improvements in mortgage rate and buying sentiment. Still, the most notable movement came in the mortgage rate outlook. The net share of consumers who believed rates would go down over the next 12 months rose 11 percentage points to 7%.
“This marks the first month that most consumers expect mortgage rates to go down than go up since January 2025,” Fannie Mae reported.
Despite the shift, the majority of respondents remained cautious. Only 28% said it was a good time to buy a home, up from 23% in July, while 72% said it was a bad time. The net share of those who said it was a good time to buy, though improved, remained deeply negative at -44%.
In a recent interview Melissa Cohn, regional vice president at William Raveis Mortgage, said the market had begun to show signs of normalization. Although prices and rates remained somewhat high, the increase in supply has allowed for a more normal homebuying experience.
“Buyers today have the luxury of being able to look at a house, think about it, and look at another house,” Cohn told Mortgage Professional America. “They know that the house that they like, even though they're not quite sure they want to bid on it, is not going to run away from them. It's a much healthier market than a market where, if you'd like it, you’ve got 10 minutes. If you don't buy it, someone else is.”
On the selling side, sentiment softened. The net share of consumers who said it was a good time to sell dropped 4 percentage points to 17%. “Majority of consumers (58%) say it’s a good time to sell, while 41% say it’s a bad time to sell,” the report noted.
Home price expectations also cooled. The net share of consumers who expected prices to rise fell 10 percentage points to 18%. Forty percent anticipated higher prices, while 22% saw prices declining.
A recent Realtor.com report found that as of August, only 28% of homes on the market were affordable for the average US household, down from from 55.7% in 2019.
The maximum affordable home price for a median-income household has fallen to $298,000, a decrease of nearly $30,000 since 2019, when it stood at $325,000. This erosion of buying power is attributed to higher mortgage rates, which have soared despite a 15.7% rise in median incomes over the same period. For example, a buyer today is paying an additional $7,200 per year in financing for a $400,000 home compared to 2019.
Meanwhile, expectations for rental price growth eased, with consumers predicting a 4.9% increase on average over the next year, a 1.1 percentage-point drop from July.
Job security concerns ticked up, with the net share of employed consumers not concerned about losing their job falling 5 points to 45%. Most respondents (70%) said their household income was about the same as a year ago, and only 17% reported higher income.
The survey was conducted among 1,122 household financial decision makers from August 1 to 20.
