Consumer Confidence in Housing Market Rises as Buyers Adjust to High Prices

A new survey shows that consumer sentiment in the housing market continues to improve, even as home prices and mortgage rates remain elevated. The Fannie Mae Home Purchase Sentiment Index climbed 0.4 points in November to 75, marking a significant 10.7-point increase over the past year—a rise of more than 16%.

Optimism About Mortgage Rates

The survey revealed growing optimism about future mortgage rates, with 45% of respondents expecting rates to drop in the next 12 months. Meanwhile, 25% believe rates will rise, reflecting a shift in expectations as consumers adapt to the current economic environment.

Despite these signs of confidence, only 23% of consumers believe it’s a good time to buy a home, although the percentage who think it’s a bad time has slightly declined, from 80% in October to 77% in November. On the selling side, 64% of respondents still think it’s a good time to sell, with no change from the previous month.

Long-Term Adjustment to Market Conditions

Mark Palim, Fannie Mae’s chief economist, attributes the improved sentiment to consumers gradually acclimating to higher prices and mortgage rates. “This improvement in sentiment continues a trend that began about two and a half years ago,” Palim said, noting that the change is partially driven by optimism about falling mortgage rates and improved perceptions of housing market conditions.

Mortgage rates have averaged around 6.7% recently, slightly down from highs of 6.84% earlier this year. However, they remain significantly above pre-pandemic levels, adding pressure to affordability.

Consumer Expectations

Expectations for home prices are shifting as well. Only 38% of respondents believe home prices will increase in the next year, down slightly from October, while 25% expect prices to fall and 36% anticipate they’ll stay steady. The predicted rate of home price appreciation is now below 1%, reflecting a decline in expectations throughout 2024.

Outlook for 2025

Housing experts predict a modest 2% to 4% increase in home prices in 2025, paired with a potential decline in mortgage rates. If these trends materialize, it could further bolster consumer confidence and drive more activity in the housing market.

While challenges remain, the survey highlights a growing sense of optimism as Americans adjust to elevated costs and prepare for potentially more favorable conditions ahead.