Housing sentiment jumps as nearly a third of Americans believe mortgage rates will fall

Consumers are feeling more enthusiastic about the U.S. housing market, with a rising share saying they think mortgage rates will fall over the next 12 months, according to a new survey by Fannie Mae.

The monthly Home Purchase Sentiment Index rose 2.9 points in December to 67.2, driven primarily by consumers’ expectation that rates will fall, the government-sponsored enterprise said on Monday. The HPSI uses information from Fannie Mae’s National Housing Survey, which goes back to 2010.

In December, 31% of consumers said they expect rates to fall in the coming year, up from 22% in November. 

“A survey-high share of consumers [anticipate] mortgage rate declines over the next year,” Mark Palim, vice president and deputy chief economist at Fannie Mae, said in a statement.

The 30-year fixed-rate mortgage is averaging 6.62% as of Jan. 4, according to Freddie Mac. Rates are down from a recent peak of 7.79% in late October.

At the same time, 31% of survey respondents also expect rates to rise, and 36% expect rates to remain the same. But the jump in respondents expecting rates to fall offset the other two components.

Home-buying sentiment still remains “overwhelmingly pessimistic,” Fannie Mae said, with only 17% of respondents saying it’s a good time to buy a home. That’s up from a survey low of 14% the previous month.

The share of respondents who think it’s a bad time to buy a home also fell, to 83% from 85% the previous month.

Home sellers are feeling less optimistic about the market as well, with the share of those who said it’s a good time to sell a home falling to 57% from 60% the previous month.

The share of respondents who said they believe home prices will go up in the next 12 months fell to 39% from 41%.

The median price of a resale home in November was $387,600, according to the National Association of Realtors.

With rates falling, the biggest concern for the housing market is whether there will be more homes for sale. Low inventory has led to buyers converging on a limited pool of resale homes or turning to newly built homes for more options.

“Homeowners have told us repeatedly of late that high mortgage rates are the top reason why it’s both a bad time to buy and sell a home, and so a more positive mortgage rate outlook may incent some to list their homes for sale, helping increase the supply of existing homes in the new year,” Palim said. 

“Of course, that’s likely dependent on the extent to which mortgage rate expectations are met with actual mortgage rate declines,” he added.

This article was originally published by a www.marketwatch.com . Read the Original article here. .