The prevailing reality of high mortgage rates is impacting prospective homebuyers and sellers. With 30-year mortgage rates hovering around 7%, Fannie Mae’s latest housing market survey reveals a significant drop in consumer confidence regarding future rate declines.
Only 35% of respondents in January anticipated mortgage rates falling within the next year, a sharp decrease from 42% in December and a peak of 45% in November. Conversely, the proportion expecting rate increases surged to 32% from 25%.
Housing market economists have cautioned that substantial rate reductions are unlikely in the near term. The Federal Reserve has tempered its rate-cutting projections, and uncertainties surrounding economic policies and their potential impact on inflation and growth persist. Despite these indicators, consumer optimism for lower rates remained strong for several months but is now demonstrably waning.
“Consumers appear increasingly pessimistic about improvements in housing affordability,” observed Kim Betancourt, Fannie Mae’s Vice President of Multifamily Economics and Strategic Research. “A growing segment anticipates increases in home prices, rent prices, and mortgage rates.”
Despite the negative sentiment surrounding mortgage rates, Fannie Mae’s Home Purchase Sentiment Index (HPSI) edged up 0.3 points to 73.4. This marginal increase reflects a slightly more optimistic outlook among buyers and sellers regarding buying and selling conditions and home price trends over the next 12 months.
The percentage expecting home price appreciation in the coming year rose to 43% from 38%, while those predicting price declines fell to 22% from 27%. Furthermore, concerns about rising rents are escalating, with 65% of respondents anticipating rental price increases, up from 57% in December.
The HPSI is calculated from specific questions within Fannie Mae’s monthly National Housing Survey, which polls approximately 1,000 adults. The January survey data was collected between January 1st and January 21st. The shift in sentiment underscores the challenges facing the housing market as high mortgage rates continue to influence buyer and seller behavior.
