Mortgage Rate Pessimism Soars as Homebuyers Adjust to Higher Reality
Amid persistent 7% average 30-year mortgage rates, consumer optimism for rate declines has plummeted. Fannie Mae's latest survey reveals a sharp decline from 42% in December to a mere 35% in January. Conversely, the expectation of rate increases has surged to 32% from 25%.
Economists attribute this shift to the Federal Reserve's diminished rate-cutting outlook and uncertainties surrounding President Trump's economic policies' impact on inflation and growth. Consumers are increasingly pessimistic about improving housing affordability, with growing expectations for higher home prices, rents, and mortgage rates.
Despite mortgage rate pessimism, Fannie Mae's Home Purchase Sentiment Index has slightly improved to 73.4. This indicates modest optimism among buyers and sellers regarding purchasing or selling conditions and home values over the next year.
Respondents expect home prices to rise (43%) rather than fall (22%), while 65% anticipate increases in rental prices. The index is derived from Fannie Mae's monthly survey of approximately 1,000 adults, conducted from January 1-21.