Housing market sentiment rose in December, according to Fannie Mae, as a strong labor market and low mortgage rates boosted consumer confidence.
The Home Purchase Sentiment Index rose to 91.7, nearing the record high of 93.8 set in August, Fannie Mae said in a report on Tuesday. The share of people who said it was a good time to buy a home jumped 16 percentage points from a year ago to 59%. While the number decreased from the prior month, that’s a typical pattern for December when people are busy with the holidays.
Sellers also were optimistic. The share of people who said it was a good time to put a home on the market rose to 65%, up 7 percentage points from a year earlier, and a gain of 3 percentage points from November.
“The continued strength in the HPSI attests to the intention among consumers to purchase homes,” said Doug Duncan, Fannie Mae’s chief economist. The measure “supports our prediction of a healthy housing market in 2020, as well as consumers’ appetite and ability to absorb the expected increase in entry-level inventory,” he said.
Home sales this year, including existing and new homes, probably will rise 1.9%, larger than the 1.7% gain in 2019, Fannie Mae said in a forecast issued Dec. 23.
The gains will be led by new home sales, according to the forecast. Builders will start construction on 975,000 single-family homes in 2020, the forecast said. That would be the highest level since 2007, based on government data.
Mortgage rates may set new lows, another boost to the housing market, the forecast said. The average fixed rate probably will be 3.6% in 2020, which would be the lowest annual average ever recorded in Freddie Mac records going back to 1973.
That compares with 3.9% in 2019 and 4.5% in 2018, according to Fannie Mae. The current record was set in 2016 when the annual average fell to 3.65%.