Consumers are optimistic that mortgage rates and home prices will decline, but most are still pessimistic about buying homes.

Fannie Mae’s home purchase sentiment index (HPSI) — which tracks the housing market and consumer confidence to sell or buy a home — rose 0.6 points to 72 in August. The full index is up 5.2 points year over year.

In August, a survey-high 39% of consumers said they expect mortgage rates to decline in the next 12 months, up from 29% in July. And about 25% of consumers indicated they expect home prices to decrease over the next 12 months, up from 21% in July. 

Despite the improved affordability outlook, consumer perception of homebuying conditions remained unchanged. A total of 17% of survey respondents said it’s a good time to buy. 

“On a national level, housing sentiment was largely unchanged in August despite some positive developments for affordability, including a meaningful decline in actual mortgage rates and an uptick in home listings in certain markets, particularly in the Sunbelt,” Mark Palim, Fannie Mae’s vice president and deputy chief economist, said in a statement.

Palim noted that 56% of survey respondents from the South indicated that it’s a “good time to sell,“ a decrease of 5 percentage points from July. This represented a strong divergence from the sense of home selling conditions in the Northeast (80%), Midwest (70%) and West (66%), where readings moved higher in August. 

“This likely reflects in part the wide geographic variation in new home construction activity,” Palim said. “In the regions that had a stronger construction response following the pandemic, our latest survey data suggest that sellers may be losing some of their negotiating power due to the increased supply.“

On a national level, both single-family and multifamily housing starts were down in July from a year ago. 

Single-family starts were down 14.1% from June and down 14.8% year over year to a seasonally adjusted annual rate of 851,000 units, according to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD). Multifamily starts came in at a rate of 363,000, up 11.7% from June, but down 21.8% year over year.