After the US Federal Reserve raised interest rates last week, the Fed chairman signalled a possible pause in rate hikes. The news was followed by a decline in interest rates, with economists expecting mortgage rates to gradually fall this year and in 2024.

Consumers saw this as a good sign for mortgage rates. The monthly Fannie Mae Home Buyer Sentiment Index rose in April to its highest level since May 2022.

In April, 22 percent of consumers surveyed said they expect interest rates to fall, compared to 12 percent the previous month.

Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a statement that the rise in overall homebuyer sentiment was "largely driven by more optimistic consumer expectations for mortgage rates".

The belief that mortgage rates will fall over the next year is "likely due to a combination of factors," Duncan said, "including the perception of decelerating inflation, market hints that monetary conditions will ease in the near future, and of course the decline in actual mortgage rates this month."

The proportion of respondents who said it was a good time to buy a home rose from 20 per cent last month to 23 per cent in April.

However, those interested in buying a home remain frustrated by how expensive it is to do so. Many respondents said they expected house prices to rise over the next 12 months. 37 per cent believed house prices were rising in April, up from 32 per cent the previous month.

Duncan said that even though buyers felt more optimistic in April, this may "prove temporary" "as consumers continue to report uncertainty about the direction of house prices".

He pointed to high home prices as the main reason why consumers don't think now is the time to buy a home.

The median price of an existing home is $375,700, according to an April report from the National Association of Realtors. A new home is $449,800, according to the Census Bureau.

"Until affordability improves for more homebuyers," Duncan added, "we think home sales will continue to be subdued compared to previous years."

This time last year, the frenetic pace of home sales had slowed considerably after the Federal Reserve raised interest rates, and the NAR said home sales were down 22 per cent in March compared to the previous year.

"Housing has just moved from being like a champagne-filled party to a tighter market," Beth Friedman, CEO of Brown Harris Stevens, told MarketWatch on a Barron's show.

With higher interest rates and historically high home prices, "people are more cautious and everything is more expensive".