Mortgage rate sentiment picks up despite coronavirus threat

by Candyd Mendoza10 Mar 2020

Americans showed more positive mortgage-rate expectations last month than they did in February 2019 as the coronavirus outbreak put a dent on the stock market and consumers' outlook toward the economy.

The Fannie Mae Home Purchase Sentiment Index (HPSI) moderated in February, down 0.5 points to 92.5 month over month, but still hovered near its survey high of 93.8. The annual HPSI, on the other hand, went up 8.2 points, partly due to more optimistic mortgage sentiments.

"The HPSI remained relatively steady in February, reflecting another month of robust consumer sentiment consistent with strong housing market data to start the year," said Doug Duncan, senior vice president and chief economist of Fannie Mae. "In particular, household income sentiment picked back up as more workers saw their wages rise amid tight labor market conditions, helping bolster already strong housing demand."

Three of the six HPSI components posted month-over-month declines, including the share of Americans who believe that now is a good time to purchase a home.

The Fannie Mae HPSI component highlights include:

  • The net share of Americans who say it is a good time to buy a home stayed the same in February at 59%. Year over year, the component decreased two percentage points
  • The net share of Americans who think it is a good time to sell rose from 66% to 67%. Year over year, the component held steady last month
  • The net share of Americans who expect home prices to go up in the next 12 months dipped from 48% to 47%. Year over year, the component fell two percentage points
  • The net share of Americans who believe mortgage rates will go down in the next 12 months climbed from 7% to 8%. Year over year, the component decreased four percentage points
  • The net share of Americans who say they are not concerned about losing their job in the next 12 months edged down from 86% to 85%. Year over year, the component stayed unchanged
  • The net share of Americans who reported that their household income is significantly higher than it was 12 months ago increased from 27% to 32%. Year over year, the component grew five percentage points

"Though American consumers' optimism about the direction of the economy is higher this month than at any point in the survey's nearly 10-year history, the late-February stock market decline, precipitated in part by evolving expectations of the potential economic impact of the coronavirus, is not fully reflected in this month's results due to the timing of our survey data collection, which ended Feb. 22," Duncan said. "We may see some volatility in sentiment in the months ahead as these circumstances play out."