Mortgage Rates: Consumer Optimism Wanes Amid Higher Rates
As mortgage rates remain elevated around 7%, potential homebuyers and sellers are becoming more pessimistic about their trajectory. Fannie Mae's latest survey reveals a decline in the number of consumers who believe rates will fall in the next 12 months.
Shifting Expectations and Rising Rates
In January, only 35% of respondents anticipated a decrease in mortgage rates, compared to 42% in December and 45% in November. Conversely, the share of consumers who expect rates to increase rose to 32% from 25%.
Economists warn that rate cuts may be limited this year due to the Federal Reserve's revised expectations and uncertainties surrounding President Trump's economic agenda. Despite previous optimism, consumers are now less hopeful about rate decreases.
Home Affordability Concerns
"Consumers are increasingly pessimistic about the overall affordability of housing," said Fannie Mae's Kim Betancourt. "Growing numbers expect home prices, rent prices, and mortgage rates to increase."
Home Purchase Sentiment Index
Despite pessimism about mortgage rates, Fannie Mae's Home Purchase Sentiment Index ticked up 0.3 points to 73.4. Buyers and sellers expressed slightly more optimism about buying and selling conditions and home prices in the next year.
The survey also reflected growing concerns about rental prices, with 65% of respondents anticipating an increase compared to 57% in December.