Housing Survey Finds Consumers Wary of Rising Rates

The recent spike in mortgage rates has “dampened” consumers’ views of the housing market, according to Fannie Mae’s latest survey.

During the first seven months of this year, consumers generally agreed that the housing market was gradually improving.

But the August survey found consumer sentiment “hit a plateau,” according to Fannie chief economist Doug Duncan.

“The pause in positive momentum is consistent with slowing trends in home purchase contract signings and mortgage applications,” Duncan said.

The percentage of consumers who say it is a good time to buy a home fell 3 percentage points to 71% and those who said it is a good time to sell a house fell 4 percentage points to 36%.

But consumers seem a little more upbeat in their predictions for mortgage rates and home prices.

Nearly two-thirds (60%) of respondents expect rates will go up in the next months, down 2 percentage points from the July survey. And 55% of respondents expect home prices will be higher 12 months from now, down 2 percentage points from the prior month. Only 7% of respondents expect prices to decline.

“The spike in mortgage rates associated with the possibility that the Fed will begin to wind down its asset purchase program later this month has dampened the improving trend in consumer sentiment regarding housing witnessed in our survey since the start of this year,” Duncan said.

Meanwhile, interest rate volatility will likely remain elevated,” he said, due to the “upcoming budget and debt ceiling debates as well as the crisis in Syria.”