According to Fannie Mae's Home Purchase Sentiment Index® (HPSI), released in January 2024, 31% of consumers expect mortgage rates to decrease in 2024. The HPSI is an index based on the National Housing Survey conducted by Fannie Mae and reflects current and mortgage interest rates. future housing market outcomes; The December results show that the percentage of consumers expecting mortgage rates to fall is the highest since the survey began in 2010. Additionally, 17% of consumers said it was a good time to buy a home, which was slightly higher than when it was the right time to buy a home. 14% of consumers added optimism to their housing market expectations in the past month.
This optimism was likely fueled by a downward trend in mortgage rates beginning in mid-November 2023, after average rates reached nearly 8%. Based on the latest Freddie Mac Primary Mortgage Market Study®, the 30-year fixed-rate mortgage rate was 6.69%. Consumers appear to be hoping that housing affordability pressures will ease as we head into 2024. High mortgage rates are the main reason both potential buyers and sellers believe now is a bad time to buy or sell.
As seen in Figure 2, the downward trend in mortgage rate forecasts is expected to narrow the gap between market rates and the lower average rates to which Virginia homeowners are locked in. As this gap narrows, more sellers, especially those who want to buy but have been delayed by interest rate trends, are likely to be motivated to put their homes on the market. The increased supply of existing homes is expected to ease the strain caused by pent-up demand in the market.
All forecasts suggest the housing market is heading in the right direction, but how things play out in 2024 will depend on how low mortgage rates fall. Either way, these signs of easing affordability issues for both homeowners and potential buyers stand in contrast to slowing home sales activity, rising interest rates, and inventory constraints in 2023. It's a welcome respite.
For more information on housing, demographics and economic trends in Virginia, be sure to check out Virginia REALTORS®' other economic insight blogs and data pages.
