Mortgage Rates Sobering Reality Sets In: Consumers Lose Hope for Declines
Amidst stagnant mortgage rates hovering around 7%, the perception shift among potential homebuyers and sellers is evident. Fannie Mae's recent housing market survey indicates a sharp decline in anticipation for rate drops.
In January, only 35% of respondents foresee lower mortgage rates in the next year, a notable decrease from 42% in December and a survey high of 45% in November. Conversely, the percentage expecting rate increases has risen to 32% from 25%.
Economists had forecast limited rate reductions this year, citing the Federal Reserve's revised rate-cutting outlook and uncertainties surrounding President Trump's economic agenda's impact on inflation and growth. However, consumer optimism had persisted for months. This trend now appears to be waning.
"Consumers are increasingly pessimistic about affordability conditions as the expectation of rising home prices, rent prices, and mortgage rates pervades the market," stated Kim Betancourt, Fannie Mae's Vice President of Multifamily Economics and Strategic Research.
Despite concerns about mortgage rates, Fannie Mae's Home Purchase Sentiment Index rose slightly to 73.4. Buyers and sellers expressed increased optimism about purchasing, selling conditions, and home prices in the coming year.
43% anticipate home price increases (up from 38%), while only 22% predict declines (down from 27%). Concurrently, concerns about rising rents are growing, with 65% believing they will climb (up from 57% in December).
The Home Purchase Sentiment Index is derived from Fannie Mae's monthly National Housing Survey of 1,000 adults. The January survey occurred between January 1st and 21st.