Consumers Cite Mortgage Rates as Primary Barrier to Home Affordability

According to the latest Fannie Mae Home Purchase Sentiment Index® (HPSI), consumers are now pointing to mortgage rates, rather than home prices, as the main hindrance to home affordability. The HPSI decreased by 2.4 points in September to 64.5, reflecting the negative sentiment among consumers due to elevated mortgage rates.

The survey revealed that 16% of consumers believe it is a good time to buy a home, matching the all-time low set last year. Additionally, 63% of respondents stated that it was a good time to sell a home, down 3 percentage points from the previous month. Only 17% of consumers expect mortgage rates to decrease over the next 12 months.

Doug Duncan, Fannie Mae’s Senior Vice President and Chief Economist, highlighted the impact of high mortgage rates on consumer sentiment. He noted that high mortgage rates have surpassed high home prices as the top reason why consumers perceive it as a bad time to buy a home, marking a significant shift in perception. Duncan also emphasized that unfavorable mortgage rates were listed as the primary reason why homeowners believe it is a bad time to sell a home.

The survey findings indicate that many homeowners are reluctant to give up their lower mortgage rates, which could potentially suppress sale values if the pool of qualified homebuyers is limited by elevated mortgage rates. Moreover, consumers expressed concerns about the lack of affordability relief in the near future, as they anticipate home prices to continue rising over the next 12 months.

The overall sentiment suggests that home purchase affordability will remain a challenge, leading to sluggish home sales in the coming year. The HPSI, which measures consumers’ current views and forward-looking expectations of the housing market, decreased by 2.4 points in September but remains 3.7 points higher compared to the same period last year.

Fannie Mae conducts the Home Purchase Sentiment Index by distilling information from its National Housing Survey into a single number. The survey assesses consumers’ attitudes toward owning and renting a home, purchase and rental prices, household finances, and overall confidence in the economy.

Despite the current challenges, Fannie Mae continues to work towards advancing equitable and sustainable access to homeownership and affordable rental housing for millions of people across America.