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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 54 November 2024 J O U R N A L at lower-income levels: 79% of lower-in- come renters with at least one adult employed full-time were cost-burdened in 2022. Middle-income renter house- holds were not immune to the problem, with 31% having cost burdens. The study notes that it is important to contextualize the affordability chal- lenges of middle-income renter house- holds, focusing the housing programs and policies on those who most need them. Taken as a whole, these programs could disproportionately target house- holds with fewer economic problems and who face fewer barriers to oppor- tunity due to systemic racism (e.g., in education, employment, and housing). They could also accidentally bypass those who need the programs the most. As such, state and local policies should be carefully written to serve the middle-income renters with the greatest need in markets that do not serve them properly. It is also important to ensure that middle-income aid never replaces subsidies for lower-income renters. Policymakers also need to consider alternatives for assisting middle-income renters than simply direct subsidies. Some cost-effective methods include loosening restrictive zoning ordinanc- es, expediting permit processes, and providing density bonuses for projects that hit a specified affordability level. By reducing the overall cost per unit, these projects could create affordability for middle-income renters without invest- ing public dollars or diverting aid from lower-income households. SHIFT IN MORTGAGE RATE OPTIMISM PUSHES HOUSING SENTIMENT HIGHER C onsumers expressed strong levels of optimism in the survey regarding a drop in mortgage rates over the next year, which helped the Fannie Mae Home Purchase Sentiment Index (HPSI) to rise 1.8 points in September to 73.9, the highest level in over two years. A record 42% of consumers said in September that they anticipate a decrease in mortgage rates, up from 24% in June and 39% in the month before. In contrast, 27% antici- pate an increase in mortgage rates, and 31% anticipate a stay the same. A majority of consumers did, how- ever, also say that they anticipate rising housing costs over the upcoming year, which would somewhat counteract the anticipated rate-driven gain in afford- ability. While respondents' perceptions of the state of the homebuying market improved slightly, they are still relatively close to their all-time low, with only 19% saying it's a good time to buy a house. Conversely, 65% of consumers believe that now is a favorable moment to sell a house. Year over year, the entire index is up 9.4 points. "Although most consumers continue to think it's a 'bad time' to buy a home, the recent shift in attitude toward mort- gage rates is pushing overall housing sentiment higher, and a growing share are now pointing to high home prices rather than high mortgage rates as the primary sticking point for affordability," said Mark Palim, SVP and Chief Econo- mist at Fannie Mae. "Increased positivity that mortgage rates will continue to fall has driven the HPSI to a 30-month high, but we've yet to see consumers' newfound rate optimism translate into a meaningful increase in home sales activity. Instead, as we noted in our latest housing forecast, existing home sales are on pace to record their lowest annual total since 1995. This signals to us that consumers are paying attention to the easing interest rate environment but still feel stymied by the considerable run-up in home prices over the last four years." Fannie Mae HPSI Component Highlights The Home Purchase Sentiment Index (HPSI) for Fannie Mae increased by 1.8 points to 73.9 in September. When compared to the same period last year, the HPSI is up 9.4 points. • Good/Bad Time to Buy: The percentage of respondents who said it is a good time to buy a home increased by two percentage points in October (19%) while the percentage who said it is a bad time to buy decreased from 83% to 81%. As a result, the net share of those who said it is a good time to buy increased 3 percentage points month over month (MoM) to -62%. • Good/Bad Time to Sell: The percentage of respondents who said it is a good time to sell a home (65%) remained unchanged from September, while the percentage who said it's a bad time to sell (35%) increased by one percentage point. As a result, the net share of those who said it was a good time to sell fell just one percentage point MoM to 30%. • Home Price Expectations: The percentage of respondents who said home prices will go up in the next 12 months increased from 37% to 39% and the percentage who said home prices will go down decreased from 25% to 23%. The share that believed home prices would stay the same remained at 37%. As a result, the net share of those who said home prices will go up in the next 12 months increased three percentage points MoM to 16%. • Mortgage Rate Expectations: The percentage of respondents who said mortgage rates will go down in the next 12 months increased from