A new poll by Fannie Mae found that more Americans than ever think mortgage rates will go down in the next 12 months.
Two economists said it’s likely that they’re right.
According to a monthly study by housing finance giant Fannie Mae FNMA 5.00%, the number of people who said they thought mortgage rates would go down in the next 12 months rose from 29% to 39%. The share is at its highest level since 2010, when Fannie Mae started keeping track of how people felt about buying a house.
People were a little more optimistic about the U.S. home market after hearing that mortgage rates were going to go down as expected. The monthly Home Purchase Sentiment Index from Fannie Mae went up by 0.6 points in August to 72.1. The National Housing Survey from Fannie Mae, which goes back to 2010, is used by the HPSI.
There were also more people who said they thought home prices would go down in the next twelve months. While almost 40% of respondents still think home prices will go up in the next year, the number of respondents who think they will go down rose from 21% to 25%.
The National Association of Realtors says that the typical price of a previously owned home in July was $422,600. This was the highest price ever recorded for that month.
Even though more people think rates and home prices will go down, they are still not very excited about getting a house. This is most likely because homes are too expensive and not enough are available, Fannie Mae said on Monday.
83% of people who answered the poll in August said it was not a good time to buy a home. This was up from 82% the month before.
The main reasons people are still worried about the housing market, according to Mark Palim, vice president and deputy chief economist at Fannie Mae, are that homes are still too expensive and not enough are on the market.
How low are rates going to get?
In the past few weeks, mortgage rates have been going down because the Federal Reserve is expected to lower interest rates. Freddie Mac reported that the 30-year rate was running 6.35% on September 5. This was 77 basis points less than it was a year ago.
Rates also went down on Friday after the August jobs report showed that the job market was slowing down. It wasn’t great that the U.S. economy only added 142,000 jobs in August, which makes people even more sure that the Fed will lower interest rates later in September. A daily poll by Mortgage News Daily found that the average 30-year fixed-rate mortgage rate dropped 8 basis points to 6.27%. On Monday, rates dropped even more, to 6.25%. Chen Zhao, who is in charge of economics study at Redfin and down 12.13%, agrees with consumers that rates will go down over the next 12 months.
“Now that inflation is mostly gone and the job market is clearly weakening, the Fed’s only question is not whether they need to start cutting rates, but how quickly they should do so,” Zhao said. “They will come faster and rates will fall more over the next year if the economy is weak.”
Danielle Hale, Realtor.com’s top economist, said that she thinks rates will go down until at least 2025.
Hale said, “Consumers have a well-informed view.” Realtor.com thinks that rates will continue to drop in 2025 because the Fed is likely to cut rates again and the difference between mortgage rates and rates on other risk-free assets is narrowing. Rates will drop to 6.3% by the end of this year.
(Realtor.com is run by Move Inc., a division of News Corp. Dow Jones, which publishes MarketWatch, is also a part of News Corp.
In its August housing report, Fannie Mae said that the 30-year mortgage rate would average 5.9% by the fourth quarter of 2025. It also thinks that home prices will rise less quickly over the next year.
There is less demand and more supply in some neighborhood markets.
Palim also said that consumers’ negative views on the housing market vary by location. In August, for example, only 56% of people in the South thought it was a good time to sell, while 80% of people in the Northeast thought it was a good time to sell.
He said that the difference “reflects in part the wide geographic variation in new home-construction activity.” “Our most recent survey data suggest that sellers may be losing some of their negotiating power because there are more homes for sale in areas that had a stronger construction response after the pandemic.”
