The Fannie Mae Home Purchase Sentiment Index (HPSI) increased 0.3 points in January to 73.4, bouncing back slightly after falling last month for the first time since July, according to a release.

Improvements in consumer optimism toward both homebuying and home-selling conditions, along with even greater expectations that home prices will rise over the next 12 months, drove the increase.

However, after a surge in mortgage rate optimism in the second half of last year, January saw a 13-percent-point decline in the net share of consumers who believe mortgage rates will go down in the next 12 months. In addition, the share of consumers who expect rental prices will go up increased 8 percentage points from last month to 65 percent. Year over year, the HPSI is up 2.7 points.

“Consumers seem increasingly pessimistic that housing affordability conditions will improve across the board, as a growing share expects home prices, rent prices, and mortgage rates will all go up,” Kim Betancourt, vice president of Fannie Mae’s Multifamily Economics and Strategic Research, said in the HPSI report. “The lower optimism toward the mortgage rate outlook was largely expected, as rates have continued to stay elevated and even crossed the 7 percent threshold in mid-January.

“As noted in our latest forecast, we currently expect mortgage rates to end 2025 around 6.5 percent, relatively little changed from where we are today, which will likely continue to hinder relief for housing affordability and home sales activity,” Betancourt added. “On the rental side, consumers have indicated a sharply growing expectation over the past two months that rent prices will increase. This mirrors our expectation that multifamily rents will grow between 2.0 percent and 2.5 percent this year — up from an estimated 1.0 percent last year. Even though it remains relatively cheaper for consumers to rent than buy in nearly every U.S. metro, we expect affordability issues will remain a real challenge for both renters and homeowners alike for the foreseeable future.”

The percentage of respondents who say it is a good time to buy a home (22 percent) and the percentage who say it is a bad time to buy (78 percent) both stayed the same from last month. The net share of those who say it is a good time to buy increased by 2 percentage points month-over-month to -55 percent.

The percentage of respondents who say it is a good time to sell a home (63 percent) and the percentage who say it’s a bad time to sell (36 percent) both remained unchanged month- over-month. The net share of those who say it is a good time to sell increased 1 percentage point month-over-month to 28 percent.

The percentage of respondents who say home prices will go up in the next 12 months increased from 38 percent to 43 percent, while the percentage who say home prices will go down decreased from 27 percent to 22 percent.

The share who think home prices will stay the same decreased from 35 percent to 34 percent. As a result, the net share of those who say home prices will go up in the next 12 months increased by 9 percentage points month-over-month to 20 percent.

The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 42 percent to 35 percent, while the percentage who expect mortgage rates to go up increased from 25 percent to 32 percent.

The share who think mortgage rates will stay the same increased from 32 percent to 33 percent. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased 13 percentage points month-over-month to 3 percent.

The percentage of employed respondents who say they are not concerned about losing their job in the next 12 months increased from 77 percent to 78 percent, while the percentage who say they are concerned stayed at 22 percent. As a result, the net share of those who say they are not concerned about losing their job increased by 2 percentage points month-over-month to 56 percent.

The percentage of respondents who say their household income is significantly higher than it was 12 months ago remained at 17 percent, while the percentage who say their household income is significantly lower decreased from 11 percent to 9 percent. The percentage who say their household income is about the same increased from 70 percent to 73 percent, a new survey high. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago increased 2 percentage points month-over-month to 8 percent.