Buying optimism up as consumer anxiety eases
Fannie Mae’s monthly survey indicates Americans are feeling better about market conditions, interest rates and job security than they were earlier this spring.
After getting scared off by tariffs and economic volatility during the first few months of the year, consumers appear to be feeling a little better about the housing market.
Fannie Mae's monthly Home Purchase Sentiment Index, which tracks consumer attitudes and expectations around housing, came in at 73.5 points in May, up 4.3 points from April and up 5.4 points compared to March.
Outlook more positive overall: The index focuses on six areas related to the housing market, home prices, mortgage rates and personal finances — five of which rebounded strongly from April to May.
The mortgage rate outlook had one of the highest month-to-month improvements, with 29% of the more than 1,300 consumers surveyed expecting it to go down in the next 12 months. That's up from 26% in April, though still well below the November outlook, when 45% of respondents thought mortgage rates would start falling.
Warming up to buying: Significantly more consumers now believe buying conditions are favorable. In May, 26% said it's a good time to buy, up from 23% in April — and a year ago, just 14% were bullish on buying.
While nearly three quarters of respondents still think it's a bad time to buy, that's the lowest share in almost three years. Attitudes about selling conditions, home price outlook and job security also improved.
Income has dipped: The one survey component that worsened in May was household income. While most respondents (70%) said their income was about the same as it was a year ago, 10% of consumers said their income was significantly lower, up from 8% in April. That's still an improvement from May 2024, however, when 12% reported a significant decline in income.
More inventory a positive for buyers: Recent economic data indicates some improvement for buyers, with increased supply and moderating home-price growth. Realtor.com estimates that total inventory hit the 1 million level last month, the first time that's happened since late 2019, due in part to more new home construction in some regions.
"Digging into local trends, we see how important construction has been. Areas where there has been more homebuilding have generally seen a stronger recovery in homes for sale," said Danielle Hale, chief economist for Realtor.com.
Interest rates still a challenge: Mortgage rates remain elevated, and economists don't see signs that rates are coming down significantly anytime soon with government debt and tariff impacts continuing to be ongoing concerns for inflation.
Last week's jobs report showed steady growth, with 139,000 jobs added in May and the unemployment rate staying at 4.2%. That means the Federal Reserve will likely continue to hold off on rate cuts when it meets next week.