NEW YORK, March 7 (Reuters) - U.S. homebuying sentiment

rose for a third consecutive month in February largely because a

growing view among current homeowners that now is a good time to

sell their house could bode well for a much-needed uptick in

home listings.

Fannie Mae's Home Purchase Sentiment Index increased by 2.1

points in February to 72.8 from 70.7 in January, it said on

Thursday. On a year-over-year basis, it rose by more than 25%.

The share of consumers surveyed who said it is a good time

to sell a home rose to 65% in February from 60% the month prior.

That component was the largest contributor to the index's gain.

"Consumer attitudes toward home-selling conditions increased

markedly in February, with current homeowners, in particular,

expressing greater optimism that it's a 'good time to sell,' a

development that may foreshadow an upcoming increase in existing

home listings," said Doug Duncan, Fannie Mae's senior vice

president and chief economist.

The inventory of homes for sale remains historically low as

homebuilding has failed to keep pace with demand and many

current homeowners are locked into lower-rate mortgages secured

before interest costs started rising. That has kept many

potential sellers from putting their homes on the market.

While the improved seller sentiment foreshadows increased

supply, buyer sentiment remained overwhelmingly negative, Duncan

said, even as it ticked up slightly to 19% from 17% in January.

With interest rates still high, mortgage payment affordability

has weighed on would-be buyers, and the net outlook for mortgage

rates falling 5 points on a month-over-month basis, the report

said.

"A decline in mortgage rates - and the resulting uptick in

sentiment - would obviously bode well for the upcoming spring

homebuying season, although affordability will likely remain a

significant challenge for buyers, at least until there's a

meaningful addition to net supply," Duncan said.

For the week ended March 7, the average rate on a 30-year

fixed-rate home loan fell to 6.88% from 6.94% the week prior,

snapping a streak of four weekly increases, according to Freddie

Mac data. Rates have eased from two-decade highs near 8% seen in

October, and 35% of consumers expect that trend to continue into

2024, Fannie Mae said.