Tom Kalinski, RE/MAX of Boulder

Tom Kalinski, RE/MAX of Boulder

Home buyers nationwide sense a positive change in the air, which can be chalked up to one reason: They expect mortgage rates to drop. Though the U.S. Federal Reserve increased rates in early May, comments from the Chairman of the Federal Reserve suggested a potential hike pause.

“Rates dipped after the news, and economists are expecting mortgage rates to gradually decline over the course of this year and into 2024,” reports The expectation of falling mortgage rates is enough to make a growing percentage of home buyers feel a lot more optimistic about the housing market, according to a Fannie Mae poll published Monday.

Fannie Mae surveys consumer sentiments about home purchases each month and then reports its findings in the Fannie Mae Home Purchase Sentiment Index® (HPSI). In April, the HPSI rose to its highest level since May 2022, jumping 5.5 points to 66.8. The percentage of consumers that expect mortgage rates to go down grew to 22%, compared to only 12% last month. However, the combined HPSI components are still a net negative.

Affordability — or the cost of housing — quelled positive sentiment toward homebuying, with only 23% of respondents indicating it’s a good time to buy a home. The continued high home prices “remain the primary reason given by consumers who think it’s a bad time to buy a home,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.

The home-buying sentiment increase in April “was the largest in over two years, primarily driven by consumers’ more optimistic mortgage rate expectations,” Duncan said.

Those who responded to the survey believe mortgage rates will fall over the next year, which Duncan says could be due to a combination of factors, “including an awareness of decelerating inflation, market suggestions that monetary conditions will ease in the not-too-distant future, and, of course, actual mortgage rate declines during the month.”

The share of respondents who said it’s a good time to buy a home rose to 23% in April, increasing 3% over March, while the percentage who say it is a bad time to buy decreased from 79% to 77%. The net share of those who say it is a good time to buy increased by six percentage points month over month.

On the sell side, respondents who say it is a good time to sell a home rose 4%, from 58% to 62%. Those who say it’s a bad time to sell decreased by 2%, dropping from 40% to 38%.

Home prices continue to drag home buying, and more survey respondents expect home prices to go up in the next 12 months. The rise over March was 5%, going from 32% to 37%, while the percentage who say home prices will go down increased from 31% to 32%.

Duncan said April’s optimism may not continue since consumers report “uncertainty about the direction of home prices.” The median price of an existing home nationwide was $375,700, as the National Realtors Association reported in April. A new home was $449,800, according to the Census Bureau.

“Until affordability improves for a larger swath of the homebuying public,” Duncan added, “we believe home sales will remain subdued compared to previous years.”

The U.S. Federal Reserve have increased interest rates 10 times over the past 14 months, causing mortgage rates to more than double.

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By Tom Kalinski. Tom is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in commercial and residential real estate. For questions, email Tom at [email protected], call 303.441.5620, or visit