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Americans are increasingly hopeful that home prices will peak and mortgage rates will return to normal, but now is a good time to buy a home, according to a monthly survey from mortgage giant Fannie Mae. Only one in four people think so.
A Fannie Mae survey in November found that only 23% of people thought it was a good time to buy a home, compared with 14% a year ago, when mortgage rates were near their post-pandemic peak. It has been increasing since.
Nearly two-thirds of the 1,050 household decision makers who took part in the latest national housing survey said November was a good time to sell.
Fannie Mae’s Home Purchase Sentiment Index (HPSI), which combines six questions from the National Housing Survey into a single number, rose to 75.0 in November, up just 0.4 points from October but 17% year over year. rose.
“Over the past year, we’ve seen a significant improvement in public consumer confidence in the housing market, driven primarily by increased optimism that mortgage rates will fall,” said Mark Parim, chief economist at Freddie Mae. , due to improved awareness of both the home buying and home selling situations.” said in a statement on Monday.
mark parim
The improvement in sentiment “continues a trend that began nearly two-and-a-half years ago following the significant spike in home prices during the pandemic, with consumers slowly but steadily adapting to current market conditions.” That is also likely to be a contributing factor,” Palim said. “Of course, high home prices and mortgage rates remain the main reasons why most consumers think now is not a good time to buy, and we expect this trend to continue into the new year.”
Forecasts released last month by economists at Fannie Mae and the Mortgage Bankers Association included significant downward revisions to home sales forecasts and a more cautious outlook on the prospects for lower mortgage rates next year.
Source: Fannie Mae National Housing Survey, November 2024.
A November poll found that nearly one in four Americans (38%) expect home prices to rise in the next 12 months, while the proportion expecting prices to fall has increased to 25%.
36% expect prices to remain stable, and the net share expecting house prices to rise next year is 12%, down from a high of 28% in June in 2024.
This is consistent with the view of housing experts surveyed by Fannie Mae for its Home Price Expectations Survey (HPES), which found that nationally, annual home price increases will increase by 3.8% in 2025, up from 5.2% this year. , which is expected to slow to 3.6% in 2025. In 2026.
Reducing home price growth “could alleviate some of the affordability burden and provide incentives for some households, especially to finally make the decision to buy a home,” Palim said. Ta.
Source: Fannie Mae National Housing Survey, November 2024.
Mortgage rates are another factor reducing housing affordability, with many prospective sellers unwilling to give up low interest rates on existing mortgages, making properties scarce in some markets. This promotes the lock-in effect.
Nearly half (45%) of consumers surveyed in November expected mortgage rates to fall in the next 12 months, up from 39% in October.
Although 25% of those surveyed still think there is room for interest rates to rise, the net share of those who expect mortgage rates to fall next year has increased by four points since October to 20%.
The latest National Housing Survey was conducted from November 1st to November 19th and mortgage rates ranged from a 2024 low of 6.03% recorded on September 17th to the fourth highest recorded on November 20th. The stock was still up to its quarterly high of 6.85%. Ratelock data tracked by Optimal Blue.
Interest rates have been trending lower since then on expectations that the Federal Reserve will continue to cut rates next year, with the average interest rate on a 30-year fixed-rate loan at 6.56%, according to data from Optimal Blue on Friday.
Demand for mortgage purchases increased for the fourth straight week in the week ending Nov. 29, hitting the highest level since January, according to a weekly survey of lenders conducted by the Mortgage Bankers Association.
Source: Fannie Mae National Housing Survey, November 2024.
From October to November, the share of Americans who said it was a bad time decreased by 3 points, so the net share of Americans who said it was a good time to buy increased by 6 points, or -54%. It became.
More than a third (36%) of Americans surveyed in October said they would be more likely to rent than buy if they needed to move, an increase from 2010. This is the highest in a new survey.
But last month, the share of consumers who said they would buy a home if they moved rebounded six points to 69%, while the share who said they would rent fell to 30%.
Source: Fannie Mae National Housing Survey, November 2024.
Americans still view the housing market as favorable to sellers, with nearly two-thirds (64%) of those surveyed saying November is a good time to sell, and starting in October. Although it has not changed, it has increased from 60% last year.
Source: Fannie Mae National Housing Survey, November 2024.
Fannie Mae’s Home Purchase Sentiment Index (HPSI) continues to recover from its all-time low of 56.7 in October 2022, although it often hovered above 90 in the months before the pandemic.
Two of the six factors used to calculate the HPSI (purchasing status and mortgage rate outlook) improved in November, while the other two declined. Concerns about sales and job losses remained unchanged.
Consumer sentiment that home prices will rise reflects confidence in the housing market, so a decline in expectations for home price increases has a negative impact on the HPSI.
Another HPSI component that decreased in November was household income. Just 16% of household decision makers surveyed last month expected their income to increase significantly in a year’s time, down from 18% in October.
Although this question is not factored into the HPSI, a November poll found that 31% of Americans believe the economy is on the right track, up from 24% a year ago.
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