Consumers expecting lower mortgage rates less optimistic about buying

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Consumer expectations of further mortgage rate drops leaves them seemingly in no rush to enter the purchase market which could be why their optimism on home buying is falling, a Fannie Mae report said.

Normally, improved mortgage rates typically spur homebuyer demand as more favorable financial conditions prompt shoppers to act on their desire to buy a property. Fannie Mae's April Home Purchase Sentiment Index shows some hesitancy among potential buyers.

"Households remain upbeat about economic activity but have more mixed attitudes toward the housing market. While home selling confidence remains strong and more consumers on net expect mortgage rates to decline over the next year, respondents walked back some of their buying optimism from March," Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a press release.

"Improving perceptions of income gains and a softening home price growth outlook should help support housing demand. However, increasing expectations among consumers that mortgage rates will continue to be favorable for some time will likely gain additional support following last week’s Fed meeting — and may also be reducing their urgency to buy," he said.

The share of consumers reporting it's a good time to sell a house in April held steady at 43% from the prior month, but those claiming it’s a good time to buy dropped 8 percentage points over the same period, and 15 from the previous year.

Consumers expecting rates to decline over the next 12 months increased 8 percentage points year-over-year and 5 percentage points month-over-month. At the same time, the share anticipating growth in home prices over the next year fell 13 percentage points from last year and 2 percentage points from March to April.

People are, however, better positioned to make a home purchase, as the share reporting their household income is significantly higher than 12 months ago increased 4 and 2 percentage points on an annual and monthly basis, respectively.

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Purchase Mortgage rates Home prices Economy GSEs Fannie Mae