A Black couple stands in front of a home at sunset.

Buyer sentiment is up despite market challenges 

Fannie Mae’s Home Purchase Sentiment Index saw the biggest increase in nearly a year.

May 16, 2023
3 minutes

Key points:

  • The Home Purchase Sentiment Index increased to 66.8 in April — a 5.5 point monthly jump.
  • The level is the highest it's been since May 2022, signaling renewed consumer confidence.
  • Consumers believe that mortgage rates have peaked, Fannie Mae researchers said, leading to the higher HPSI.

We've all seen the stories about how difficult it is for homebuyers to keep their spirits up when mortgage interest rates are still hovering around 6.5%, when inventory remains tight in hot markets, and when there's renewed chatter about a government budget impasse and potential default on national debt.  

But even against this backdrop of uncertainty, consumer sentiment toward housing improved in April, according to Fannie Mae's latest Home Purchase Sentiment Index. The index, which is adjusted each month, is a holistic look at consumer sentiment toward homeownership, household finances, home financing and general confidence in the country's economy.

In April, the HPSI increased by 5.5 points to 66.8, which Fannie Mae indicates is significant for being the highest level since May 2022. In the months leading up to the pandemic, the HPSI was consistently in the low 90s. It dropped dramatically at the start of the pandemic before largely recovering during much of 2020 and the first half of 2021 — but then began a downward slide that persisted for nearly all of 2022. 

The latest uptick is thanks to a perception that mortgage rates will likely fall later in the year, Fannie Mae researchers said in the report. 

"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," said Doug Duncan, Fannie Mae senior vice president and chief economist.

Still, the survey indicates that consumers believe the market remains squarely in seller territory. Just under a quarter of respondents (23%) said it was a good time to buy. While low, the net figure is actually up from the previous month, and even up slightly from a year ago. On the selling side, 62% of respondents said it was a good time to sell, which also represented a monthly increase but a significant drop from last year.

Much remains uncertain for buyers, particularly as a credit crunch has led to the collapse of several regional banks in the last few months. And while Fed Chairman Jerome Powell signaled that this month's rate hike could be the last for the time being, there's no guarantee that the Fed won't continue to increase the cost of borrowing to combat inflation.

Fannie Mae acknowledged that this recent uptick in buyer sentiment could be shortlived if market conditions don't continue to improve.

"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."

Get the latest real estate news delivered to your inbox.