Home Buyer Optimism Fades in February

Pessimism abounds in February

Although borrower conditions are improving, elevated mortgage rates, high home prices, and growing economic uncertainty cut home buyer confidence in February.

See how home buyers (and consumers in general) feel about the current economy and what their biggest holdups are.

How are home buyers feeling?

The general consensus among house hunters helps shape market competition.

More demand — especially when for-sale inventory is low — can create frenzied bidding wars and accelerate home price growth. Then, the pendulum could swing the other way. Worsening home buyer conditions may give borrowers a chance at a comparatively good deal on a property.

Through a consumer survey, Fannie Mae’s Home Purchase Sentiment Index (HPSI) evaluates the overall view and outlook of the housing market. The index launched in 2011 and runs on a scale of zero to 100. It reached a high of 93.8 in August 2019 and a low of 56.7 in October 2022.

In February, the HPSI fell to 71.6, down from 73.4 month-over-month and 72.8 year-over-year. It marked the first annual decline since April 2023 behind decreased mortgage rate optimism.

“This growing pessimism makes sense, as mortgage rates had remained near the 7% threshold for a few months, including when we fielded this survey. The decline in sentiment was further impacted by consumers’ growing concerns about their own personal financial situations,” said Mark Palim, deputy chief economist at Fannie Mae. “While some consumers may be slowly acclimating to the higher mortgage rate environment, the vast majority continue to believe it is a ‘bad time’ to buy a home – with high home prices cited as the primary sticking point. We continue to expect home sales activity to remain relatively light over our forecast horizon due to the ongoing lack of supply and overall unaffordability.”

The table below shows the overall HPSI scores from the last 12 months:

The HPSI components

The overall index dissects into six components: Good time to buy, good time to sell, home price expectations, mortgage rate expectations, job loss concern, and household income.

Below is the breakdown of each measure for February 2025:

How are consumers feeling?

Additionally, the Conference Board’s Consumer Confidence Index (CCI) gives a broader view on people’s attitudes with spending and economic outlook.

The CCI, with a baseline of 100, hit a score of 98.3 in February. That fell from 105.3 in January and 106.7 in February 2024. Overall, it was the third straight month-over-month decrease and biggest since August 2021.

The CCI comprises two sub indexes covering income, business and labor; one based on current circumstances and one on short-term outlooks.

The Present Situation Index declined to 136.5 from 139.9 in January, while the Expectations Index dropped to 72.9 from 82.2. That marked the first time the Expectations Index dipped below 80 since June 2024, a score which, according to the Conference Board, typically serves as the canary in the coalmine for a recession.

“Views of current labor market conditions weakened. Consumers became pessimistic about future business conditions and less optimistic about future income. Pessimism about future employment prospects worsened and reached a 10-month high,” said Stephanie Guichard, senior economist at The Conference Board.

“References to inflation and prices in general continue to rank high in write-in responses, but the focus shifted towards other topics. There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current Administration and its policies dominated the responses.”

The CCI components

The overall CCI breaks down into five measurables: Current business conditions, current labor market, expected business conditions, expected labor market, and income prospects.

The table below shows the month-to-month shifts in consumer confidence levels for the five CCI components. Expected and prospective conditions are based on the next six months.

The bottom line for home buyers

Good or bad home buying conditions, experts will tell you that trying to time the market right rarely works. They also tend to advise that the best time to buy is when you find a property you can afford.

So get ahead of competition and do all the prep work before applying for a mortgage. If you need to beef up your financial profile, you can try to raise your credit score and qualify for down payment assistance programs.

If you’re ready to start your homeownership journey, reach out to a local loan officer today.