Consumer confidence in the housing market rebounds

Consumer outlook regarding the housing market is turning more positive as 2025 approaches, a recent survey reveals.

This shift in mood is mostly driven by expectations that interest rates will drop and home price growth will slow in the coming year, according to Fannie Mae's latest Home Purchase Sentiment Index.

The percentage of respondents who anticipate a dip in interest rates over the next 12 months increased from 39% to 45%, while those who think home prices will shift downwards increased from 23% to 25%. 

Additionally, the share of people who believe it is a good time to buy a home grew from 20% to 23%, suggesting that consumers may be adjusting to a higher-rate and higher-cost housing environment, the government-sponsored enterprise said.

Fannie's November's HPSI rose 0.4 points to 75.0 in November, marking a 10.7-point increase from 64.3 during the same period last year.

"Over the past year, we have seen a significant improvement in general consumer sentiment toward the housing market," said Mark Palim, chief economist at Fannie Mae in a statement. "Notably, this improvement in sentiment continues a trend that began about two and a half years ago following the sizable run-up in home prices during the pandemic, and it is likely due in part to consumers' slow-but-steady acclimation to current market conditions."

Elevated rates and home prices are still dampening consumers' desire to buy — and may continue to do so for some time — but the sentiment is starting to improve, the chief economist said.

"More consumers expect home price growth to slow…which may help ease some of the affordability burden and incentivize some households, especially those who have been waiting in the wings, to finally act on their home purchase decision," Palim added.

Despite some uncertainty regarding the future political landscape, those surveyed are not that worried about losing their jobs and many expect their financial situation to get better in the year to come.

Out of the approximate 1,000 consumers questioned, 78% said they are not concerned about losing their job in the year ahead, a slight dip from 79% the month prior. Almost 50% of those questioned see their financial wherewithal getting better in the next 12 months and only 18% expect it to get worse.

The rosier outlook on the year ahead clashes with a resounding majority noting that the economy is on the wrong track. Out of those surveyed, 68% are unhappy with the economy and a mere 31% claim to be satisfied, Fannie Mae said.

Positive sentiment toward home buying will be a welcome sign for the mortgage industry, which  hired new employees in anticipation of increased origination activity that has yet to materialize.