Soaring Mortgage Rates Dampen Homebuyer Optimism
Average 30-year mortgage rates remain at elevated levels near 7%, prompting a shift in consumer sentiment. Fannie Mae's latest survey reveals a sharp decline in the belief that mortgage rates will drop in the next 12 months.
Just 35% of respondents now expect rates to fall, down from 42% in December. Conversely, the share of consumers anticipating rate increases has jumped to 32%, from 25%.
Economic experts caution that rate cuts may be limited this year, given the Federal Reserve's revised expectations and uncertainties surrounding President Trump's economic policies' impact on inflation and growth.
Consumers are also growing pessimistic about housing affordability. An increasing number of respondents expect higher home prices, rent prices, and mortgage rates.
Despite this, Fannie Mae's Home Purchase Sentiment Index has risen slightly to 73.4, indicating some optimism regarding buying and selling conditions and home prices. The percentage of respondents expecting home prices to increase rose to 43%, while those anticipating a price drop decreased.
Additionally, there is growing concern about rising rents, with 65% of respondents predicting an increase in rental prices.
The Home Purchase Sentiment Index is based on monthly surveys of approximately 1,000 adults conducted by Fannie Mae.