Are you thinking ‘We should buy a house’?
A recent survey indicates that confidence in the housing market persists due to the sustained elevation of mortgage rates.
Amidst uncertain prospects for the housing market’s trajectory, Americans remain steadfast in their assessment of the current environment for home purchases. According to the Fannie Mae Home Purchase Sentiment Index (HPSI), nearly 80% of respondents view the present as an unfavorable time to buy a house. Despite this, the index held steady in April compared to the previous month, signaling consumers’ adjustment to persistently high mortgage rates that show little indication of abating. The average rate for a 30-year loan stood at 7.22% last week, maintaining consumer confidence levels up by 8% year-over-year.
However, fewer Americans anticipate a decline in mortgage rates over the next 12 months, which has led to a hesitancy among potential buyers awaiting improvements in affordability. Doug Duncan, Fannie Mae‘s senior vice president and chief economist, noted that while housing sentiment experienced an upswing from November through February, driven primarily by the belief that mortgage rates would decrease, recent economic indicators such as stubborn inflation, escalating mortgage rates, and ongoing home price appreciation have instilled caution among consumers regarding the market’s direction.
A closer examination of mortgage rate expectations reveals a diminishing anticipation of a rate reduction. In the latest survey, only about a quarter of respondents foresaw a drop in rates over the next year, down from nearly a third in the previous month. This contrasts with the beginning of the year when close to 40% of survey participants expected rates to decline. Edward Seiler, associate vice president of the Mortgage Bankers Association (MBA), attributed this trend to robust economic and job market data, which is expected to maintain mortgage rates at elevated levels in the near term, dissuading some prospective buyers from entering the housing market.
With mortgage rates hovering around 7% for 30-year loans in recent months, monthly mortgage costs have escalated. The national median payment surpassed $2,200 in March, up from $2,184 in February, according to the MBA. As average 30-year loan rates exceeded 7% over the last three weeks with no signs of abating, monthly payments could become even more burdensome going forward.
In contrast to the concerns of homebuyers, an increasing number of Americans perceive the current moment as opportune for selling. The share of survey respondents expressing confidence in selling surged to nearly 70% in April, up from 60% at the beginning of the year and 62% in the same month last year. This growing optimism among home sellers could be attributed to the sustained growth in home prices nationwide, with the latest national housing price index showing a 6.4% gain in February.
Despite expectations of high prices, more than 40% of Fannie Mae’s survey participants anticipate further home price increases over the next year, compared to 37% earlier this year. Duncan emphasized that consumers’ generally improved perception of home-selling conditions augurs well for listings and housing activity, particularly among individuals adjusting their financial expectations to the current mortgage rate and price environment.
