Buyers gain hope on rates, sellers turn cautious

The headlines about potential declines in mortgage rates has consumers more inclined to become home buyers, but views on selling took a hit last month, Fannie Mae reported.

Its Home Purchase Sentiment Index for August was 71.4, a 0.4 point decline from July. The only months in the past 12 which the index was lower were in March, 68.1; April, 69.2; and June, 69.8.

The August 2024 HPSI was 72.1.

The National Housing Survey showed a shift in August, with 33% of respondents expecting mortgage rates to fall in the next year, up from 28% in July. Meanwhile, the share predicting higher rates dropped to 26% from 32%.

The net percentage of respondents who believe prices will rise in the next year went to 18% from 28%, a decline of 10 percentage points.

Good time to buy perception versus bad time

More consumers surveyed in August, 28%, said it was a good time to buy a home, compared with 23% in July. This caused a rise in the net good time to buy of 9 percentage points.

But the net share of people who consider it a good time to buy was still well underwater, at -44%.

Redfin data released on Sept. 4 noted the median housing payment was down to $2,593 per month at the same time mortgage rates were also moving lower.

This did lead to what it termed a "modest" rise in pending home sales of 1.6%.

"Mortgage rates haven't come down significantly enough to bring back a flood of buyers, " said Mariah O'Keefe, a Redfin agent from Seattle in a press release. "House hunters are on rate watch, hoping they'll drop below 6%."

They may be waiting for a while. Fannie Mae's latest forecast calls for 6.5% for a 30-year fixed rate mortgage at the end of this year and a 6.1% rate in 2026. The Mortgage Bankers Association is at 6.6% in this year's fourth quarter with expectations that rates will remain at 6.5% all of next year.

How home sellers are reacting

Rate expectations are apparently taking a toll on the outlook of those looking to sell their homes. While 58% of respondents said now is a good time to sell and just 41% said it is a bad time, the net 17% is 4 percentage points lower than July and 14 percentage points lower than August 2024.

New listings rose just 1.1% compared with early September 2024, Redfin said. The total number of homes for sale rose by the smallest amount in 18 months, 11.3%.

Among the other components of the HPSI, the net share of those not concerned about losing their job in the next 12 months was 45%, 5 percentage points lower month-to-month and 12 percentage points less than one year prior; and the net in favor those who said their household income was higher than 12 months prior was 5%, 3 percentage points lower than July but 2 above August 2024. About the same was the top response to this question at 70%.

Other questions Fannie Mae asked consumers

When asked if they would buy or rent if they moved, 68% of survey respondents said they would purchase, a 2-point increase from July and flat from a year ago.

The renter share was 32%, 1 percentage point lower than July and also flat with August 2024.

But 55% believed they would have a difficult time getting a mortgage in August, up from 54% in July but down from 56% a year ago.

Those who say the U.S. economy is on the right track had a 3 percentage point month-to-month increase in share, to 35%.