F
annie Mae's Home Purchase Sentiment Index, which gauges consumer attitudes towards the housing market, rose to 73.5 points in May, a 4.3-point increase from April and a 5.4-point jump from March. This uptick suggests Americans are becoming more optimistic about market conditions, interest rates, and job security.

    The index tracks six areas related to the housing market, home prices, mortgage rates, and personal finances. Five of these areas showed significant improvement in May compared to April. Notably, 29% of consumers surveyed expect mortgage rates to decrease within the next year, a 3-point increase from April. This is still lower than November's outlook, but indicates a shift towards more positive expectations.

    Buyer sentiment has also improved, with 26% of respondents believing it's a good time to buy, up from 23% in April and 14% a year ago. While nearly three-quarters still think it's a bad time to buy, this is the lowest share in almost three years. Attitudes about selling conditions, home price outlook, and job security have also become more positive.

    However, household income has dipped slightly, with 10% of consumers reporting a significant decline, up from 8% in April. This is still an improvement from May 2022, when 12% reported a similar decline.

    The recent increase in inventory and moderating home-price growth are welcome signs for buyers. Realtor.com estimates that total inventory hit the 1 million level last month, the first time since late 2019, due to increased new home construction in some regions.

    Despite these positive trends, mortgage rates remain elevated, and economists don't expect significant rate cuts anytime soon, given ongoing concerns about inflation and government debt. The steady job growth reported last week, with 139,000 jobs added in May and an unemployment rate of 4.2%, suggests the Federal Reserve will likely maintain its current stance on interest rates.