In July, housing confidence increased as more Americans reported now is a good time to buy, according to Fannie Mae’s latest Home Purchase Sentiment Index.
According to the GSE’s report, sentiment rose by 2.2 points in July to 93.7. Not only is this a 7.2-point increase from last year’s level, but it also marks a new survey high.
Fannie Mae Senior Vice President and Chief Economist Doug Duncan said despite ongoing housing supply and affordability challenges, the HPSI reached a new high thanks to strong job confidence and favorable mortgage rate expectations.
“Consumers appear to have shaken off a winter slump in sentiment amid strong income gains,” Duncan said. “Therefore, sentiment is positioned to take advantage of any supply that comes to market, particularly in the affordable category.”
That being said, Duncan warns that recent financial market events could weigh on consumer sentiment looking ahead.
Despite this warning, Fannie’s index reveals increases in the “Good Time to Buy” and “Good Time to Sell” components, which rose by 3 and one percentage points, respectively.
Complementing that rise, more consumers said they now expect mortgage interest rates to fall within the next 12 months, as that component rose one percentage point in July, the report notes.
Last week, Freddie Mac reported that the 30-year, fixed-rate mortgage averaged 3.75%, falling significantly from its 2018 rate of 4.60%.
“Mortgage rates have essentially stabilized over the last two months, which reflects the recovery and improvement in the economy from the malaise earlier in the year,” Freddie Mac Chief Economist Sam Khater said. “Going forward, the combination of low mortgage rates, tight labor market and high consumer confidence should set up the housing market for continued improvement in home sales heading into the late summer and early fall.”
NOTE: Fannie Mae’s Home Purchase Sentiment Index is constructed from six questions, gauging the current views and forward-looking expectations of consumers navigating the housing market.