Weekly Market Update

Mortgage Optimism Boosts Sentiment

The Home Purchase Sentiment Index hit a two-year high in September, driven by growing optimism about falling mortgage rates. With 42% of consumers expecting lower rates, the housing market may see increased activity as buyers anticipate more favorable conditions.

18 October 2024 5 min read

Dane Smith

Head of North American Investment Strategy & Research

Chris Carpentier, CFA, FRM

Senior Investment Strategist

Aditya Patel, CFA, CA

Research Analyst, Investment Strategy & Research

Zanub Raza

Fixed Income Portfolio Specialist

Saketh Reddy, CFA

Research Analyst, Investment Strategy & Research

The Home Purchase Sentiment Index (HPSI) increased in September to 73.9, the highest it has been in over 2 years, marking a significant shift in consumer expectations for the housing market. The index is designed to track consumers’ housing-related attitudes, intentions, and perceptions, using questions from the National Housing Survey® (NHS).

A critical development in the recent data is the direction of optimism regarding future mortgage rates. The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 39% to 42%, a recent survey high.

Elevated rates have discouraged not only new buyers, but also existing homeowners who may want to move but do not want to give up their existing low rate. With consumers expecting rates to fall, concerns may begin to ease and attract buyers to re-enter the market. This could lead to an increase in activity for home sales, especially when lenders start to reflect these expectations with more favorable terms.

Affordability seems to be the key here, and although there still seems to be restraints, this shift in confidence may suggest some buyers will act sooner, anticipating future savings on mortgage payments. If consumers act on their optimistic outlook, then the housing market could be a growth engine again, contributing to the soft landing that we continue to expect.

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