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Consumers increasingly believe mortgage rates will decline

Despite consumer concerns about several related economic factors, perceptions of falling mortgage rates were enough to push Fannie Mae’s Home Purchase Sentiment Index (HPSI) to a scant 0.1% monthly increase in August.

Hand giving key close-upThe index, which reflects consumers’ views and expectations of housing-market conditions, ended the month at 93.8, another high point for the survey and a 5.8-point year-over-year increase. The metric is distilled from six survey questions given to approximately 1,000 Americans via telephone interviews. The shares of positive or negative answers to those six questions comprise the HPSI’s six component indices.

In this case, the scant improvement in the HPSI was driven entirely by a growing belief that mortgage rates will decrease over the next year. The net share of those who say rates will go down over the next 12 months was up 11 percentage points in August. Although the component index sits at a net negative of -17%, it is up 35 percentage points compared to the same time last year.

Every other HPSI component index was either down or flat month over month. The net share of respondents who say it’s a good time to buy a home fell 1 percentage point to 25%, while the net share of those who say it’s a good time to sell is down 4 points to 40%.

The net share of those who say home prices will go up over the next 12 months receded by 1 point to 36%. The net share of people who aren’t concerned about losing their job over the same time frame fell 4 points to 77%, while the net share of people whose household income is “significantly higher” than it was 12 months ago is unchanged at 21%.

“Growing expectations that mortgage rates will remain flat or decline are reflected in the HPSI’s latest reading, which is now at a survey high, even though other indicators of economic and housing-market sentiment are flat to negative,” said Doug Duncan, Fannie Mae's chief economist.

“Unfortunately, much of the lower interest rate environment can be attributed to global economic uncertainties, which appear to have dampened consumer sentiment regarding the direction of the economy," Duncan added. "We do expect housing-market activity to remain relatively stable, and the favorable rate environment should continue supporting increased refinance activity.”


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