Posted by: The Fry Team | July 12, 2013

Outlook on Housing and Finances May Spur Potential Homebuyers to Act

Potential homebuyers may enter the purchase market sooner rather than later as more Americans expect mortgage rates and home prices to climb, according to results from Fannie Mae's June 2013 National Housing Survey. The share of respondents who say mortgage rates will go up during the next 12 months jumped 11 percentage points to 57 percent, the highest level in the survey's three-year history. Meanwhile, consumers' home price expectations have stayed strong in the face of rising mortgage rates. The share of respondents who believe home prices will go up in the next year also hit a survey high of 57 percent, while those who say prices will go down stayed steady at 7 percent. Although sentiment toward both the current home buying and selling environments retreated slightly, it remains near the survey highs of last month, with 72 percent saying it is a good time to buy and 36 percent saying it is a good time to sell.

"The spike in mortgage rate expectations this month seems to have had an impact on a number of the survey's indicators and may increase housing activity in the near term by driving urgency to buy," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Consumers may recognize that today's still favorable mortgage rates and homeownership affordability levels will recede over time. Given rising home and rental price expectations and improving personal financial attitudes, more prospective homebuyers may be deciding that now is the time to get off the fence."

Among those surveyed, 56 percent say rental prices will go up during the next year – an 8 percentage point increase and the highest level since the survey's inception – and the average 12-month rental price change expectation jumped 1.2 percent to 4.6 percent. Americans' outlook on their personal finances also increased significantly in June. The share who expect their personal financial situation to improve during the next year climbed to 46 percent, the highest level since June 2010. The share who say their household income is significantly higher than it was 12 months ago jumped 6 percentage points to a survey high 26 percent.

Other survey highlights include:

  • At 3.8 percent, the average 12-month home price change expectation fell slightly from last month's survey high.
  • The share of people who say home prices will go up in the next 12 months hit a survey high 57 percent, while those who say home prices will go down held steady at the survey low 7 percent.
  • The share of respondents who say mortgage rates will go up increased 11 percentage points to 57 percent, the highest level since the survey's inception.
  • Forty-seven percent of respondents think it would be easy for them to get a home mortgage today, a slight increase over last month.The percentage of people who expect their personal financial situation to get better over the next 12 months jumped to 46 percent, the highest level since June 2010.
  • The share of respondents who say their household income is significantly higher than it was 12 months ago rose 6 percentage points to a survey high 26 percent.
  • The percentage of respondents who say their household expenses are significantly higher than they were 12 months ago rose to 36 percent.

Reprinted with permission from RISMedia. ©2013. All rights reserved.

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