Fannie Survey: Home Prices and Mortgage Rates Expected to Increase

Consumer attitudes toward housing and the overall economy are on opposite tracks, according to Fannie Mae’s latest national housing survey.

The government-sponsored enterprise’s February poll, which asked 1,008 Americans to assess their feelings toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances and overall consumer confidence, found that consumers have positive attitudes toward housing, but are sentimental about the future of the economy.

For example, average 12-month home price expectations increased 0.5% over the previous month to 2.9%. This figure represents the highest level since the survey’s inception in June 2010. Furthermore, 48% of survey respondents believe home values will rise in the next 12 months, while a survey-low 10% think prices will fall during this time period.

Also, 25% of respondents said now is a good time to sell a house, the highest percentage ever, while the share of individuals who said they would buy a new home if they moved increased by 2 percentage points to 67%.

“Despite fiscal headwinds and political uncertainty, consumer sentiment toward housing is robust and continues to gather strength,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

“We expect home prices to firm further amid a durable housing recovery, gradually reducing the population of underwater borrowers and helping to boost the share of consumers who say that now is a good time to sell.”

On the other hand, Americans’ views on their personal financial situation, such as household income and the direction of the economy, fell or remained flat in many of the survey categories.

At 38%, the share of respondents who said the economy is on the right track held steady for the last three months. Additionally, those who expect their personal financial situation to get better over the next 12 months fell 2 percentage points to 41%.

Household income is significantly higher compared to a year ago for only 21% of borrowers, a 2 percentage point decrease from January. Also, 31% reported significantly higher household expenses over the last year, a 7 percentage point decrease and the lowest level since the survey began.

Lastly, the highest level (45%) of consumers think mortgage rates will increase, while those who think they will go down held firm at 7%.

“Since reaching its trough last September, the share of consumers expecting mortgage rates to rise has trended up,” Duncan added. “However, despite historically low mortgage rates, nearly half of borrowers have never refinanced their mortgage. Combined with the scheduled yearend HARP deadline, rising rate expectations should prompt some borrowers to refinance soon to take advantage of more favorable mortgage terms and add to their disposable income, helping to offset ongoing fiscal drag.”

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