For the first time in two years, homebuyers feel positive about mortgage rates. (iStock)
Consumers’ optimism about buying a home is at its highest level in nearly two years, thanks to stable employment and easing mortgage rates, according to a Fannie Mae survey.
Major mortgage lenders in January Home Purchase Sentiment Index® (HPSI) It rose 3.5 points to 70.7, the highest level since March 2022. The improvement comes as many Americans feel the U.S. economy has turned a corner.
In January, 82% of consumers said they were not worried about losing their job in the next 12 months, up from 75% the previous month. Additionally, 36% of respondents said they expect mortgage rates to continue falling this year.
Mortgage rates have fallen more than 1 percentage point since late October, and Fannie Mae predicts rates could rise to 6% if the Federal Reserve cuts rates this year. Despite improving sentiment towards mortgage rates, the outlook for housing remains bleak, with just 17% of respondents believing now is a good time to buy a home.
“For the first time in the history of the National Housing Survey, a greater percentage of consumers believe that mortgage rates will fall, rather than rise, next year,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist. “There is,” he said. “Consumers have shown more confidence in their employment situation this month, another sign that housing sentiment may continue to improve in 2024.
“However, while housing affordability may improve if actual mortgage rates continue to fall, other parts of the affordability equation for consumers have not yet eased or improved,” Duncan said. continued.
Homebuyers can find the best mortgage rates by researching and comparing options. Visit online marketplaces like Credible to compare interest rates, choose loan terms, and get pre-approved from multiple lenders at once.
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Housing prices still lack affordability
In January, 37% of respondents expected house prices to rise, down slightly from 39% the previous month. However, only 22% of respondents think prices will fall, down from 24%. According to the paper, U.S. home prices rose 0.4% in December from the previous month, the smallest increase since June. Redfin Home Price Index (RHPI). According to Zillow, the typical home price in the United States in January was $344,000, with a monthly mortgage payment of $1,790, assuming a 20% reduction.
With many existing homeowners locking in mortgage rates below 4%, there is little chance of home prices falling significantly this year. This means that even if mortgage rates fall, the market will likely continue to compete for supply and home prices will continue to rise.
“The majority of people still think house prices will rise or stay the same. The ‘best time to buy’ factor continues to hover near record lows. “Less than one in five people said it had increased,” Duncan said. “Overall, lower mortgage rates support our forecast for modest increases in housing demand and sales activity in 2024, but until housing supply increases significantly, affordability remains “We expect it to remain a significant barrier to homeownership for households.” ”
If you want to refinance your mortgage to take advantage of current mortgage rates, or are ready to choose the best rate on your new mortgage, visit an online marketplace like Credible to compare rates and Consider getting pre-approved from multiple lenders.
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There is no timetable for when interest rates will fall
There is little sign that interest rates will fall heading into the spring home buying season. The Federal Reserve has kept interest rates unchanged, announcing last week that it would keep the federal funds rate at 5.25% to 5.5%, the highest level in 22 years. Meanwhile, the employment situation report for January showed solid results and the economy grew again in 2018. 4th quarter Exceed expectations for 2023.
The Fed still expects to cut interest rates several times this year, but has not yet set a timeline for how quickly or by how far. Fed officials expect at least three rate cuts this year, with the central bank saying rates are expected to fall to 4.6%. Latest economic forecasts In its Summary of Economic Projections (SEP) it said:
Fannie Mae expects mortgage rates to fall below 6% by the end of 2024, based on the Fed’s move to cut rates sooner than expected. How quickly rates will be cut will depend on how quickly inflation approaches its 2% target rate or whether the Fed senses the U.S. economy is headed toward a recession.
Even if you’re looking to become a homeowner, shopping around can help you find the best mortgage rates. Visit Credible to compare options without affecting your credit score.
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