Rising Prices, Rates Could Force Some Buyers off Fence

Americans participating in Fannie Mae’srnNational Housing Survey were apparently not caught unawares by thernrecent spike in mortgage interest rates. The share of thosernparticipating in the June round of questions who expected loan ratesrnto increase over the next 12 months shot up 11 percentage points fromrnthe May survey to 57 percent, the highest level in the survey’s threernyear history. The number of respondents who expect home prices torncontinue their upward momentum also hit a survey high of 57 percent,rnup two percentage points from the previous survey. Respondentsrnslightly moderated their expectations for the degree of price changesrnover the next month from 3.9 percent to 3.8 percent. </p

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Fannie Mae saidrnthat these expectations regarding home prices and rates may pushrnprospective homebuyers into the market “sooner rather than later.”rn Although sentiment toward both the current home buying and sellingrnenvironments retreated slightly, those saying it is a good time tornbuy or to sell stayed near the survey highs reached last month at 72rnpercent and 36 percent respectively. </p

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“The spike in mortgage rate expectations this month seems tornhave had an impact on a number of the survey’s indicators and mayrnincrease housing activity in the near term by driving urgency tornbuy,” said Doug Duncan, senior vice president and chief economistrnat Fannie Mae. “Consumers may recognize that today’s stillrnfavorable mortgage rates and homeownership affordability levels willrnrecede over time. Given rising home and rental price expectations andrnimproving personal financial attitudes, more prospective homebuyersrnmay be deciding that now is the time to get off the fence.”</p

Nearly as many respondents expect rentals to rise as expect anrnincrease in home prices. Eight percent more Americans say rents willrnrise over the next 12 months as responded that way last month, arntotal of 56 percent and the highest level since the survey began. The average 12-month rental price change expectation jumped 1.2rnpercent to 4.6 percent. </p

Americans’ outlook on their personal finances also increasedrnsignificantly in June. The share who expect their personal financialrnsituation to improve during the next year climbed to 46 percent, thernhighest level since June 2010. The share who say their householdrnincome is significantly higher than it was 12 months ago jumped 6rnpercentage points to a survey high 26 percent. </p

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Right track/wrong track responses regarding the economy continuernflat. Right track responses have moved between 38 and 40 percent forrnmonths and edged down two points to 38 this month while wrong trackrnresponses moved up 2 points to 55. </p

Forty-seven percent of respondents think it would be easy for themrnto get a home mortgage today, a slight increase over last month whilernthe share of respondents who said they would buy if they were goingrnto move decreased slightly to 65 percent. </p

Fannie Mae surveys roughly 1,000 Americans by phone each month,rnasking a series of around 100 questions to assess attitudes towardrnowning and renting a home, trends in home and rental prices,rnhomeownership distress, the economy, and other housing-relatedrnissues. The respondent panel is comprised of renters and home ownersrnboth with and without mortgages on their properties. The June Surveyrnwas conducted between June 3, 2013 and June 22, 2013.

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