The housing sentiment increased slightly in February ahead of the spring home-buying season, hitting the highest levels recorded in nearly two years, according to Fannie Mae.
In February, the monthly Home Purchase Sentiment Index rose to 72.8, marking the third consecutive month of improved confidence. It also marked the highest level recorded since March 2022.
"The HPSI increased for the third straight month, continuing its slow but steady rise from the low-level plateau observed through much of 2023; and consumer sentiment toward housing now rests firmly above where it was this time last year," Doug Duncan, Fannie Mae Senior Vice President and Chief Economist said.
The boost was attributed to an increased optimism among home sellers. In fact, Fannie Mae found that 65% of consumers surveyed said they believed it was a good time to sell. This is up from 60% in January.
How Do Homebuyers Feel About the Housing Market?
In contrast to the housing sentiment among home sellers, only 17% of would-be buyers said they believed it was a good time to buy a house. This could be caused by the low inventory of homes in the market and the high borrowing and mortgage costs.
Fannie Mae expects the consumer sentiment among buyers and sellers to improve further when mortgage rates fall close to or below 6% by the end of the year.
Mortgage rates peaked near 8% in October 2023 after the Fed hiked interest rates to cool the pace of inflation. The rates kicked off 2024 at a low of 6.62% but later increased to 6.94% at the end of February.
Mortgage rates for 30-year fixed loans dropped to 6.88%, while the rates for 15-year loans declined to 6.22% in the week ending March 7, according to Freddie Mac. It is unclear whether rates will continue falling or if they will climb again in the weeks to come.
Apart from rising mortgage rates, home prices have also increased. In February, the national median list price rose to $415,000, up from $409,500 in January. This increased the required annual household income to purchase a home to $106,000, or 80% higher than the annual household income needed to purchase a house comfortably in January 2020.
READ MORE: Aspiring Homebuyers Need To Earn 80% More To Afford a House in the Current Market: Study
