Buyers More Confident Home Prices Will Go Down, New Survey Finds
Consumers are feeling optimistic about home prices, according to Fannie Mae’s latest poll, but why?
More people are feeling optimistic about home prices and expect mortgage rates to fall, the latest poll from Fannie Mae shows.
The shift follows last week's announcement from the Federal Reserve on rate increases and Fed chair Powell voicing a possible pause on future interest rate hikes. This caused rates to dip slightly, and economists expect a decline in mortgage rates for the rest of 2023, going into 2024.
This optimism from the experts was matched by consumers in Fannie Mae's latest Home Purchase Sentiment Index® (HPSI) which saw a rise of 5.5. points to 66.8 in April 2023, the largest increase since May 2022. In April, 22% of consumers thought mortgage rates would go down, compared to only 12% in March.
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23% of poll takers also agree that now is a good time to buy a home, compared to 20% the previous month.
Doug Duncan, senior vice president and chief economist at Fannie Mae, said: “An increased number of respondents indicated they think mortgage rates will go down over the next year.” This is down to a few factors including “an awareness of decelerating inflation, market suggestions that monetary conditions will ease in the not-too-distant future, and, of course, actual mortgage rate declines during the month.”
However, while some buyers have an optimistic outlook, more people still believe home prices will rise further in the next 12 months. This view saw an increase of 16% month-over-month (37% of people polled in April expected increases, up from 32% in March.)
The Housing Market Remains Subdued
Consumers remain apprehensive about mortgage rates and home buying in general.
Duncan adds: “The bump in optimism may prove to be temporary, as consumers continue to report uncertainty about the direction of home prices. Until affordability improves for a larger swath of the homebuying public, we believe home sales will remain subdued compared to previous years.”
According to the National Association of Realtors (NAR), the median price of an existing home in April was $375,700, and the Census Bureau reported a median price of $449,800 for new homes sold in March 2023.
Since the Fed hiked interest rates this time last year, home sales have taken a hit for the worse, falling 22% in March compared to the previous year, according to the NAR.
Bess Freedman, CEO of Brown Harris Stevens, told MarketWatch on Barron’s Live: “Housing has just switched from where it was like a full-on party with champagne to a more austere market. And as interest rates and house prices remain high, “people are much more cautious and everything is a lot more expensive.”
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