In response to rising inflation throughout 2022, the Federal Reserve took action by increasing the federal funds rate, aiming to curb consumer spending by making loans more costly.
This assertive monetary policy was designed to reduce inflation from its peak above 9% to the Fed’s target of 2%. By late 2024, inflation had made steady progress toward that goal, prompting the Fed to reverse course and begin cutting interest rates.
However, contrary to forecasts that mortgage rates would dip below 6% following several rate reductions, they unexpectedly climbed back toward 7%, surprising both market analysts and potential homebuyers.
Related: Zillow sounds alarm on worrying housing market, mortgage concern
Ongoing economic volatility, erratic market behavior, and stubborn inflation have continued to exert upward pressure on mortgage rates, leading to a slowdown in housing market activity and discouraging both purchasers and sellers.
Most recently, on Sept. 17, the Federal Reserve lowered the federal funds rate by 0.25 percentage points, adjusting it from a range of 4.25%–4.5% to 4.0%–4.25%.
This marked the first rate reduction since December 2024 and was driven by growing concerns over a softening job market and persistent inflation. Fed officials have indicated that further rate cuts may be considered later in 2025.
With that background in mind, Fannie Mae examined the impact of these events and circumstances on consumer sentiment around what Americans are expecting in the coming year.
Fannie Mae finds homebuying pessimism among consumers
On Oct. 7, Fannie Mae published its September 2025 National Housing Survey (NHS) Results, which includes the Home Purchase Sentiment Index (HPSI) that measures consumer sentiment toward housing issues. It found:
- Month over month, the HPSI remained unchanged at 71.4.
- Year over year, the HPSI is down 2.5 points.
“The Home Purchase Sentiment Index (HPSI) distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey (NHS) into a single number,” explained Fannie Mae. “The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision-making.”
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Fannie Mae: Consumers believe home prices, mortgage rates will remain high
Fannie Mae found that the net share of consumers who say mortgage rates will go down in the next 12 months decreased 5 percentage points to 2% in September.
The survey revealed that the net share of consumers who say home prices will go up (18%) remained the same as last month. The share of
consumers who expect home prices to go up also remained the same (40%) while the share who expect prices to go
down also remained the same (22%).
In addition, the survey also found:
- The net share of consumers (-46%) who say it is a good time to buy a home decreased 2 percentage points since last month. The share who say it is a good time to buy decreased 1 percentage point (27%), while the share who say it is a bad time to buy (73%) increased 1 percentage point.
- The net share of consumers who say it is a good time to sell remained the same (17%). A majority of consumers (57%) say it’s a good time to sell, while 41% say it’s a bad time to sell.
- The net share of consumers who say home prices will go up (18%) remained the same as last month. The share of consumers who expect home prices to go up also remained the same (40%) while the share who expect prices to go
down also remained the same (22%). - The net share of consumers who say mortgage rates will go down in the next 12 months decreased 5 percentage points to 2% in September.
What Fannie Mae measures in its National Housing Survey
Specifically, the HPSI is based on responses to six questions from the NHS that gather consumer opinions about the state of the housing market and factors influencing their decisions to buy a home.
More on homebuying:
- Zillow warns Americans on housing market, mortgage worry
- Berkshire Hathaway HomeServices explains housing market changes
- Fannie Mae forecasts mortgage rate shakeup
These questions explore whether individuals believe it’s a favorable or unfavorable time to purchase or sell property, their expectations for changes in home prices and mortgage rates, their level of concern about potential job loss, and whether their current income is greater or less than it was a year ago.
Related: Fannie Mae predicts major mortgage rate change coming soon
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