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As we head into peak home-buying season, signs of life have begun to spring up in the housing market.
Even so, still-high mortgage rates and home prices amid historically low housing stock continue to put homeownership out of reach for many.
Moreover, the National Association of Realtors agreed to a monumental $418 million settlement on March 15 following a verdict favoring home sellers in a class action lawsuit. Still subject to court approval, the settlement requires changes to broker commissions that will upend the buying and selling model that has been in place for years.
Elevated mortgage rates, out-of-reach home prices and record-low housing stock are the perennial weeds that experts say hopeful home buyers can expect to contend with this spring—and beyond.
“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024,” said Doug Duncan, senior vice president and chief economist at Fannie Mae, in an emailed statement. “Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we’d previously forecast.”
Despite ongoing affordability hurdles, Fannie Mae forecasts an increase in home sales transactions compared to last year. Experts also anticipate a slower rise in home prices this year compared to recent years, but price fluctuations will continue to vary regionally and depend strongly on local market supply.
U.S. home prices declined in January for the third consecutive month due to high borrowing costs, according to the latest S&P CoreLogic Case-Shiller Home Price Index. But prices year-over-year jumped 6%—the fastest annual rate since 2022.
Chief economist at First American Financial Corporation Mark Fleming predicts a “flat stretch” ahead.
“If the 2020-2021 housing market was too hot, then the 2023 market was probably too cold, but 2024 won’t yet be just right,” Fleming said in his 2024 forecast.
For a housing recovery to occur, several conditions must unfold.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
And, of course, mortgage rates would need to cool off—which experts say is imminent despite rates edging back up toward 7%. For the week ending April 11, the 30-year fixed mortgage rate stood at 6.88%, according to Freddie Mac.
However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
Nonetheless, Kuba Jewgieniew, CEO of Realty ONE Group, a real estate brokerage company, is optimistic about a recovery this year.
“[W]e’re definitely looking forward to a better housing market in 2024 as interest rates start to settle around 6% or even lower,” says Jewgieniew.
Following years of litigation, the National Association of Realtors (NAR) has agreed to pay $418 million to settle a series of antitrust lawsuits filed in 2019 on behalf of home sellers.
The plaintiffs claimed that the leading national trade association for real estate brokers and agents “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”
Though the landmark settlement is subject to court approval, most consider it a done deal.
The settlement requires NAR to enact new rules, including prohibiting offers of broker compensation on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings. The rule is set to take effect in mid-July, once the settlement receives judge approval.
Moreover, sellers will no longer be required to pay buyer broker commissions and real estate agents participating in the MLS must establish written representation agreements with their buyer clients.
NAR denies any wrongdoing and maintains that its current policies benefit buyers and sellers. The organization believes it’s not liable for seller claims related to broker commissions, stating that it has never set commissions and that commissions have always been negotiable.
Per the settlement’s terms, the costs associated with buying and selling a home are set to change dramatically.
“The primary things that will change are the decoupling of the seller commission and the buyer commission in the MLS,” says Rita Gibbs, a Realtor at Realty One Group Integrity in Tucson. “It’s gonna cause some chaos.”
While sellers will no longer be able to offer broker compensation in the MLS, there’s no rule prohibiting off-MLS negotiations. Because of this, Gibbs suspects buyers and sellers will continue offering broker compensation off the MLS.
The Department of Justice confirmed it will permit listing brokers to display compensation details on their websites. However, buyer agents will need to undergo the tedious task of visiting countless broker websites to find who’s offering what.
Michael Gorkowski, a Virginia-based real estate agent with Compass, is also trying to figure out how to manage the potential ruling.
“We often work with buyers for many months and sometimes years before they find exactly what they’re looking for,” Gorkowski says. “So in a case where a seller isn’t offering a co-broker commission, we will have to negotiate that the buyer pays an agreed-upon commission prior to starting their search.”
“In the short term, it is absolutely going to injure buyers, especially FHA and VA buyers,” Gibbs says. “With rare exception, these buyers are not in a position to pay for their own agent.”
Gibbs says that if sellers don’t offer compensation, many buyers who can’t otherwise afford to pay a broker will choose to go unrepresented.
Gorkowski notes that veterans taking out VA loans face a unique challenge under the new rules. “[P]er the VA requirements, buyers cannot pay so it must be negotiated with the seller for now.”
As a result, NAR is calling on the U.S. Department of Veterans Affairs to revise its policies prohibiting VA buyers from paying broker commissions. Even so, there’s skepticism that the federal government will be able to implement changes in time for the July deadline.
Gibbs and Gorkowski are among the many agents especially concerned about first-time home buyers. After July, first-time and VA buyers will be required to sign a buyer-broker agreement stating that they will compensate their broker—but Gibbs says many won’t have the means to do so.
In this situation, agents would likely only show buyers homes where sellers are offering compensation.
“This is a very troubling situation,” Gorkowski says.
With many homeowners “locked in” at ultra-low interest rates or unwilling to sell due to high home prices, demand continues to outpace housing supply—and likely will for a while—even as some homeowners may finally be forced to sell due to major life events such as divorce, job changes or a growing family.
“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.
Housing stock remains near historic lows—especially entry-level supply—which has propped up demand and sustained ultra-high home prices. Here’s what the latest home values look like around the country.
Yet, some hopeful housing stock signs have begun to sprout:
The most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, saw a fourth consecutive monthly rise, surpassing a crucial threshold with an increase from 48 to 51 in March. A reading of 50 or above means more builders see good conditions ahead for new construction.
At the same time, new single-family building permits ticked up 1% in February—the 13th consecutive monthly increase—according to the latest data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD).
Though some housing market data indicates signs of growth are in store this spring home-buying season, persistently high mortgage rates may hinder activity from fully flourishing.
Here’s what the latest home sales data has to say.
Existing-home sales came to life in February, shooting up 9.5% from the month before, according to the latest data from the NAR. Sales dipped 3.3% from a year ago.
Experts attribute the monthly jump to a bump in inventory.
“Additional housing supply is helping to satisfy market demand,” said Lawrence Yun, chief economist at NAR, in the report.
Existing inventory rose 5.9%—logging 1.07 million unsold homes at the end of February. However, there are still only 2.9 months of inventory at the current sales pace. Most experts consider a balanced market falling between four and six months.
Meanwhile, existing home prices continue to soar to unprecedented heights, reaching $384,500, which marks the eighth consecutive month of yearly price increases and a February median home price record.
Sales of newly constructed single-family houses ticked down by a nominal 0.3% compared to January, but outpaced February 2023 sales by 5.9%, according to the latest U.S. Census Bureau and HUD data.
Amid a high percentage of homeowners still locked in to low mortgage rates, home builders have been picking up the slack.
“New construction continues to be an outsized share of the housing inventory,” said Dr. Lisa Sturtevant, chief economist at Bright MLS, in an emailed statement.
Sturtevant notes that declining new home prices are coming amid a recent trend of builders introducing smaller and more affordable homes to the market.
The median price for a new home in February was $400,500, down 7.6% from a year ago.
Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development
NAR’s Pending Homes Sales Index rose 1.6% in February from the month prior even as mortgage rates approached 7% by the end of the month. Pending transactions declined 7% year-over-year.
A pending home sale marks the point in the home sales transaction when the buyer and seller agree on price and terms. Pending home sales are considered a leading indicator of future closed sales.
The Midwest and South saw monthly transaction gains while the Northeast and West saw declines due to affordability challenges in those higher-cost regions.
“While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year,” said Yun, in the report.
Though down from its 2023 high of 7.79%, the average 30-year fixed mortgage rate in 2024 remains well over 6% amid rising home values. As a result, home buyers continue to face affordability challenges.
According to data from its first-quarter 2024 U.S. Home Affordability Report, property data provider Attom found that median-priced single-family homes remain less affordable than the historical average in over 95% of U.S. counties.
For one, the data uncovered that expenses are eating up more than 32% of the average national wage. Common lending guidelines require monthly mortgage payments, property taxes and homeowners insurance to comprise 28% or less of your gross income.
At the same time, home prices and homeownership expenses continue to outpace wage growth.
Consequently, the latest expense-to-wage ratio is hovering at one of the highest points over the past decade, according to the Attom report, despite some slight affordability improvements over the last two quarters.
“Affording a home remains a financial stretch, or a pipe dream, for so many households,” said Rob Barber, CEO at Attom.
Here are some expert tips to increase your chances for an optimal outcome in this tight housing market.
Hannah Jones, a senior economic research analyst at Realtor.com, offers this expert advice to aspiring buyers:
Gary Ashton, founder of The Ashton Real Estate Group of RE/MAX Advantage, has this expert advice for sellers:
Despite some areas of the country experiencing monthly price declines, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024.
“[T]he record low supply of houses on the market protects against a market crash,” says Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, a non-QM lender.
Moreover, experts point out that today’s homeowners stand on much more secure footing than those coming out of the 2008 financial crisis, with many borrowers having substantial home equity.
“In 2024, I expect we’ll see home appreciation take a step back but not plummet,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
This outlook aligns with what other housing market watchers expect.
“Comerica forecasts that national house prices will rise 2.9% in 2024,” said Bill Adams, chief economist at Comerica Bank, in an emailed statement.
Divounguy also notes that several factors, including Millennials entering their prime home-buying years, wage growth and financial wealth are tailwinds that will sustain housing demand in 2024.
Even so, with fewer homes selling, Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, a marketplace for new construction homes, sees a price collapse within the realm of possibility, especially in markets where real estate investors scooped up numerous properties.
“If something pushes that over the edge, the consequences could be severe,” said Hnatkovskyy, in an emailed statement.
In February, total foreclosure filings were down 1% from the previous month but up 8% from a year ago, according to Attom.
“These trends could signify evolving financial landscapes for homeowners, prompting adjustments in market strategies and lending practices,” said Barber, in a report.
Lenders began foreclosure on 22,575 properties in February, up 4% from the previous month and 11% from a year ago. Meanwhile, real estate-owned properties, or REOs, which are homes unsold at foreclosure auctions and taken over by lenders, spiked year-over-year in three states: South Carolina (up 51%), Missouri (up 50%) and Pennsylvania (up 46%).
Despite foreclosure activity trending up nationally and certain areas of the country seeing notable annual increases in REOs, experts generally don’t expect to see a wave of foreclosures in 2024.
“Foreclosure activity is still only at about 60% of pre-pandemic levels … and isn’t likely to be back to 2019 numbers until sometime in mid-to-late 2024,” says Sharga.
The biggest reasons for this, Sharga explains, are the strength of the economy—we’re still seeing low unemployment and steady wage growth—along with excellent loan quality.
Massive home price growth in homeowner equity over the past few years has also helped reduce foreclosures.
Sharga says that some 80% of today’s homeowners have more than 20% equity in their property. So, while there may be more foreclosure starts in 2024—due in part to Covid-era mortgage relief programs phasing out—foreclosure auctions and lender repossessions should remain below 2019 levels.
Buying a house—in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.
Use a mortgage calculator to estimate your monthly housing costs based on your down. But if you’re trying to predict what might happen next year, experts say this is probably not the best home-buying strategy.
“The housing market—like so many other markets—is almost impossible to time,“ Divounguy says. “The best time for prospective buyers is when they find a home that they like, that meets their family’s current and foreseeable needs and that they can afford.”
Gumbinger agrees it’s hard to tell would-be homeowners to wait for better conditions.
“More often, it seems the case that home prices generally keep rising, so the goalposts for amassing a down payment keep moving, and there’s no guarantee that tomorrow’s conditions will be all that much better in the aggregate than today’s.”
Divounguy says “getting on the housing ladder” is worthwhile to begin building equity and net worth.
Declining mortgage rates will likely incentivize would-be buyers anxious to own a home to jump into the market. Expect this increased demand amid today’s tight housing supply to put upward pressure on home prices.
Most experts do not expect a housing market crash in 2024 since many homeowners have built up significant equity in their homes. The issue is primarily an affordability crisis. High interest rates and inflated home values have made purchasing a home challenging for first-time homebuyers.
If you’re in a financial position to buy a home you plan to live in for the long term, it won’t matter when you buy it because you will live in it through economic highs and lows. However, if you are looking to buy real estate as a short-term investment, it will come with more risk if you buy at the height before a recession.
Source: forbes.com
The Fannie Mae Home Purchase Sentiment Index (HPSI) declined for the first time in four months, dropping 0.9 points to 71.9 in March. This dip marks the first decrease since November 2023 and is primarily attributed to increased pessimism about future mortgage rates. Thirty-four per cent (34%) of consumers now believe rates will rise in … [Read more…]
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What a difference a month makes: Economists at Fannie Mae no longer expect mortgage rates to fall below 6 percent this year or next and believe that “dual affordability constraints” of high home prices and mortgage rates will also keep 2024 home sales from hitting a previously forecast 5 million mark.
Last month, Fannie Mae’s eight-member forecasting team was projecting that rates on 30-year fixed-rate mortgages would drop to an average of 5.9 percent by the final three months of the year and that sales of new and existing homes would total 5.0 million.
In their latest monthly housing forecast Tuesday, Fannie Mae’s Economic and Strategic Research (ESR) Group projected mortgage rates will average 6.4 percent during Q4. While 4.91 million homes are expected to change hands this year, deals will be driven primarily by households that can no longer put off moves due to life events.
“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024,” Fannie Mae Chief Economist Doug Duncan said in a statement. “Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we’d previously forecast, as markets continue to evolve their expectations of future monetary policy.”
Even if mortgage rates stay elevated, sales of new and existing homes are expected to be stronger than last year, although the projected rebound isn’t quite as strong as Fannie Mae had forecast last month.
“We believe an increasing number of transactions will be driven by households who can no longer put off their moves simply due to interest rate lock-in effects because they need to move for life event reasons,” Fannie Mae economists said in commentary accompanying their latest forecast.
Sales of existing homes, which make up the bulk of most real estate agents’ businesses, are now projected to grow by only 3 percent in 2024, to 4.21 million. That’s about 47,000 fewer existing home sales than forecast in February.
Sales of new homes are expected to grow by close to 5 percent this year, to 699,000, which is down 35,000 from last month’s forecast for 734,00 new home sales in 2024.
“While existing sales rose 3.1 percent in January to an annualized pace of 4.0 million, these increases reflected mortgage rates in November and December,” Fannie Mae economists noted. “Pending sales, which lead closings on average by a month or two, fell in January by 4.9 percent, pointing to a likely pullback in February.”
Last month, Fannie Mae forecasters were predicting that rates on 30-year fixed-rate mortgages would fall to 5.9 percent in Q4 2024 and 5.7 percent in Q4 2025. The latest forecast is that rates will make a more gradual descent to 6.0 percent by Q4 2025.
“Strong headline jobs numbers and hotter-than-expected inflation data … led financial markets to price in a less aggressive rate-cutting path by the Federal Reserve,” Fannie Mae economists said in predicting that mortgage rates have less room to come down than previously thought.
While economists with the Mortgage Bankers Association predicted in February that mortgage rates would drop to 5.5 percent by Q4 2025, their March forecast hadn’t been issued Tuesday.
This year’s rally in mortgage rates kicked off with a surprisingly strong jobs report on Feb. 2, which put to rest speculation that the Federal Reserve might begin lowering the short-term federal funds rate in March.
Purchase mortgage applications fell for five consecutive weeks before mortgage rates began to ease again in early March. But more recent inflation data has been pushing mortgage rates higher again since March 11.
The CME FedWatch Tool, which tracks futures market investors’ expectations of the Fed’s next moves, on Tuesday put the odds that the Fed will approve one or more rate cuts by June 12 at just 59.5 percent, down from 76.2 percent on Feb. 16.
But it’s not just when the Fed starts cutting short-term rates, but how deeply it might cut over the next two or three years that’s of importance to investors who fund most mortgages.
“In our view, whether the Fed begins cutting interest rates in June or later in the year is likely to have only a small impact on the macroeconomy and mortgage rates,” Fannie Mae economists said. “In contrast, we believe the market’s expectations of the cumulative change in the fed funds rate over the next two to three years will likely have a more meaningful impact on mortgage rates.”
Unlike the short-term federal funds rate, the Fed doesn’t have direct control over mortgage rates, which are determined largely by investor demand for mortgage-backed securities (MBS). But having purchased trillions of dollars in MBS and Treasurys to keep interest rates low during the pandemic, the Fed does have influence in MBS markets that determine mortgage rates.
“Quantitative tightening” — the Federal Reserve’s ongoing program to trim $35 billion in mortgages from its balance sheet each month — could keep mortgage rates from falling dramatically this year.
When Fed policymakers meet Wednesday, they’re expected to keep their target for the short-term federal funds rate at 5.25 percent to 5.50 percent. But Fannie Mae economists say bond market investors are expecting some discussion of the quantitative tightening policy, which Federal Reserve Governor Christopher Waller has said is falling short of expectations.
In a March 1 speech, Waller said he’d like to see the Fed reduce its $2.4 trillion in mortgage holdings to zero. But because few homeowners have an incentive to refinance their existing loans, the Fed has been falling short of its target of reducing its MBS holdings by $35 billion a month.
Rather than actively selling MBS, the Fed has been letting those investments roll off its balance sheet passively, by not replacing assets that mature. But that strategy has only been trimming the Fed’s MBS balance sheet by about $15 billion a month.
To hit the $35 billion a month target, the Fed would have to start selling MBS. Even the threat of such a move might push mortgage rates higher, prompting real estate industry groups to plead with the Fed in October to go on record that it would not sell mortgages the central bank bought during the pandemic.
With home prices expected to stay elevated, purchase mortgage originations are expected to post 12 percent growth this year, to $1.367 trillion, a downgrade of $90 billion from last month’s forecast, followed by 13.5 percent growth in 2025, to $1.551 trillion.
“We have downgraded our outlook for purchase originations due to downgrades to the home sales forecast (which in turn stems from a higher mortgage rate outlook), as well as incoming data indicating a continued higher cash share of purchase transactions occurring,” Fannie Mae economists said.
Refinancings are projected to grow 60 percent this year from last year’s anemic levels, to $397 billion, or $62 billion less than forecast in February. Next year Fannie Mae is forecasting another 58 percent increase in refinancing volume, to $626 billion, as lower rates give more homeowners an incentive to refinance.
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Source: inman.com
Read more: US home sales – what’s the latest? This trend could prove frustrating for homebuyers seeking more choices in a tight market. Since older homeowners make up a substantial portion of the homeowner population, their decision to age in place limits the number of houses coming on the market, potentially further fueling competition and … [Read more…]
“The gain in existing home sales was in line with our expectations given the decline in mortgage rates in November and December (when most of these sales would have gone under contract) and a pickup in mortgage applications,” said Nathaniel Drake, analyst at Fannie Mae’s ESR group. The ESR group noted that the surprise surge … [Read more…]
The year 2024 has started with cautious optimism that mortgage rates will drop, sparking much-needed activity in the sluggish U.S. housing market.
Mortgage rates, however, have been on a rising trend of late. Recent data shows that the economy is booming, while the Federal Reserve is signaling that it will take its time before cutting benchmark interest rates.
HousingWire’s Mortgage Rates Center showed the 30-year fixed-rate mortgage at 7.21% on Feb. 23. And according to Freddie Mac‘s Primary Mortgage Market Survey, the average rate inched closer to 7% this week.
Fannie Mae, however, remains optimistic that housing market activity will pick up as existing home sales and new single-family housing starts are expected to grow modestly in 2024.
While existing home sales dipped slightly in December by 1% to a seasonally adjusted annual rate of 3.78 million units, an increase in mortgage applications and December pending home sales that led to average closing times of 30 to 45 days indicate that a modest rebound in sales is underway.
With a low supply of existing homes for sale, demand for new homes is likely to remain strong, and the limit on new home sales will be determined by homebuilder production capacity, according to a report released Friday by Fannie Mae’s Economic and Strategic Research (ESR) group.
“Single-family permits in contrast edged up 1.6 percent in January, back in line with the overall starts series,” the report noted. “With single-family permits and starts now back in alignment, we expect new single-family construction to continue to drift upward in coming months.”
Fannie Mae forecasts total mortgage origination volume of $1.92 trillion in 2024, down slightly from $1.98 trillion in its previous forecast. Volume is expected to climb to $2.36 trillion in 2025, compared to the ESR group’s January forecast of $2.44 trillion.
Softening economic growth anticipated
The ESR group upgraded its 2024 macroeconomic growth outlook due to a stronger-than-expected fourth-quarter 2023 gross domestic product (GDP) report, as well as incoming data on recent population growth and immigration trends that point to faster payroll and GDP gains over the forecast horizon.
Fannie Mae’s 2024 GDP outlook is for 1.7% growth in 2024, compared to 3.1% in 2023. The ESR group previously forecast a “mild recession” for 2024.
“An unsustainably low savings rate suggests softer consumer spending going forward, consistent with the pullback in January retail sales, and slowing local and state tax receipts point to slower direct government spending growth,” the report stated.
Further, while payroll growth looks to have reaccelerated in December and January, other labor market measurements indicate softness. The ESR group expects that the labor market “on net” is likely to cool in the near future.
“Market dynamics continue to reflect significant uncertainty regarding the sustainability of stronger-than-expected recent GDP growth, the continuity of the decline of inflation, and the path of monetary policy change, not to mention the many ways in which historical relationships in housing and the larger economy remain out of balance post-pandemic,” Doug Duncan, Fannie Mae senior vice president and chief economist, said in the report.
Source: housingwire.com
For the first time since Fannie Mae began its national housing survey (in 2010), a larger share of consumers believe mortgage rates will decrease over the next year, rather than increase.
WASHINGTON – Fannie Mae said increased confidence in job security and anticipated mortgage rate reductions have driven its Home Purchase Sentiment Index (HPSI) up by 3.5 points in January to 70.7, its highest level of optimism since March 2022.
In January, 82% of consumers said they are not concerned about losing their job in the next 12 months, up from 75% the previous month. Additionally, an all-time survey-high 36% of respondents indicated they expect mortgage rates to go down in the next 12 months, while 28% expect them to go up,and 35% expect rates to remain the same.
However, consumer perceptions of homebuying conditions remain overwhelmingly pessimistic, with only 17% of consumers indicating it’s a good time to buy a home. Overall, the full index is up 9.1 points year over year.
“Mortgage rate optimism increased markedly again in January, with a survey-high percentage of consumers anticipating mortgage rate declines over the next year,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “For the first time in our National Housing Survey’s history, a greater share of consumers believe mortgage rates will decrease over the next year, rather than increase. Consumers also expressed greater confidence in their job situations this month, another sign that housing sentiment may continue to improve in 2024.”
Duncan continued: “However, while home affordability may improve if actual mortgage rates continue moving downward, other parts of the affordability equation have yet to ease or improve for consumers. A large majority still think home prices will either increase or stay the same; the ‘good time to buy’ component continues to hover near its historical low; and fewer than one-in-five respondents indicated that their household income was significantly higher year over year, matching a survey low. All in all, while a lower mortgage rate path supports our forecast for a gradual increase in housing demand and sales activity in 2024, until we see a meaningful increase in housing supply, we expect affordability will remain a significant barrier to homeownership for many households.”
Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased in January by 3.5 points to 70.7. The HPSI is up 9.1 points compared to the same time last year.
Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home remained unchanged at 17%, while the percentage who say it is a bad time to buy remained unchanged at 83%. As a result, the net share of those who say it is a good time to buy remained unchanged month over month.
Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home increased from 57% to 60%, while the percentage who say it’s a bad time to sell decreased from 42% to 40%. As a result, the net share of those who say it is a good time to sell increased 3 percentage points month over month.
Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 39% to 37%, while the percentage who say home prices will go down decreased from 24% to 22%. The share who think home prices will stay the same increased from 36% to 40%. As a result, the net share of those who say home prices will go up in the next 12 months remained unchanged month over month.
Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 31% to 36%, while the percentage who expect mortgage rates to go up decreased from 31% to 28%. The share who think mortgage rates will stay the same decreased from 36% to 35%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased 8 percentage points month over month.
Job Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 75% to 82%, while the percentage who say they are concerned decreased from 24% to 18%. As a result, the net share of those who say they are not concerned about losing their job increased 14 percentage points month over month.
Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 20% to 17%, while the percentage who say their household income is significantly lower remained unchanged at 13%. The percentage who say their household income is about the same increased from 67% to 69%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 3 percentage points month over month.
The Home Purchase Sentiment Index (HPSI) distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey (NHS) into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.
The National Housing Survey (NHS) is a monthly attitudinal survey, launched in 2010, which polls the adult general population of the United States to assess their attitudes toward owning and renting a home, purchase and rental prices, household finances, and overall confidence in the economy. Each respondent is asked more than 100 questions, making the NHS one of the most detailed attitudinal longitudinal surveys of its kind, to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010).
The January 2024 National Housing Survey was conducted between January 2, 2024 and January 19, 2024.
© 2024 Florida Realtors®
Source: floridarealtors.org
A Fannie Mae survey released Wednesday found that optimism around mortgage rates has hit a two-year high. The Home Purchase Sentiment Index increased 3.5 points in January to 70.7, its highest level since March 2022, when the Federal Reserve began its aggressive rate hike campaign.
“Mortgage rate optimism increased markedly again in January, with a survey-high percentage of consumers anticipating mortgage rate declines over the next year,” Doug Duncan, Fannie Mae’s chief economist, said.
The survey recorded an all-time of 36% of respondents expecting home loan costs to go down in the next 12 months.
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Rates on the 30-year mortgage have slipped to 6.63%, Freddie Mac data shows. That’s after it punched past 8% back in October. The slide arrives as the Fed mulls cutting interest rates in 2024 as inflation continues to decline.
A previous report showed that Fannie Mae now expects mortgage rates to dip below 6% this year, a revision of their earlier forecast.
A strong US economy has also contributed to the upbeat sentiment. According to Fannie Mae, 82% of consumers indicated in January that they are not concerned about losing their job in the next year, up from 75% last month. And indeed, the labor market has remained strong. Unemployment has been near historic lows and the US saw a blowout jobs for January report last week.
But it’s not a complete cause for celebration yet, Duncan warned. Other parts of the affordability equation are still gloomy.
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The “good time to buy” component of Fannie Mae’s survey is still lingering near historical lows, and many consumers still think home prices will stay flat or even increase. In fact, one expert who nailed the 2023 housing forecast has said home prices could jump 7% this year.
“Until we see a meaningful increase in housing supply, we expect affordability will remain a significant barrier to homeownership for many households,” Duncan said.
Source: businessinsider.com
The latest Fannie Mae Home Purchase Sentiment Index® (HPSI) shows an increase of 3.5 points in January to 70.7, its highest level since March 2022. Overall, the full index is up 9.1 points year over year.
The index and its assessment are based on the following components:
As for the latest index:
Expert take:
“Mortgage rate optimism increased markedly again in January, with a survey-high percentage of consumers anticipating mortgage rate declines over the next year,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “For the first time in our National Housing Survey’s history, a greater share of consumers believe mortgage rates will decrease over the next year, rather than increase. Consumers also expressed greater confidence in their job situations this month, another sign that housing sentiment may continue to improve in 2024.”
Duncan continued: “However, while home affordability may improve if actual mortgage rates continue moving downward, other parts of the affordability equation have yet to ease or improve for consumers. A large majority still think home prices will either increase or stay the same; the ‘good time to buy’ component continues to hover near its historical low; and fewer than one-in-five respondents indicated that their household income was significantly higher year over year, matching a survey low. All in all, while a lower mortgage rate path supports our forecast for a gradual increase in housing demand and sales activity in 2024, until we see a meaningful increase in housing supply, we expect affordability will remain a significant barrier to homeownership for many households.”
For the full report, click here https://www.fanniemae.com/media/50266/display.
Source: rismedia.com
Many Americans expect mortgage rates to decline over the coming months but they remain pessimistic about how affordable buying a home will be in 2024, a survey by Fannie Mae shows.
The Fannie Mae Home Purchase Sentiment Index jumped by 3.5 points last month to nearly 71, its highest level since March 2022. This increased confidence was built on people feeling more secure in their jobs and those who believe the cost of a home is likely to decline this year, the index showed.
But the survey also revealed a fault line that is currently shaping the housing market— despite rates falling from their two-decade highs in the fall of last year, affordability still remains a concern for potential buyers. The Fannie Mae survey showed that a mere 17 percent of respondents said that now is a good time to purchase a property.
An all-time survey-high 36 percent of respondents indicated that they expect mortgage rates to go down in the next 12 months, while 28 percent expected them to go up, and 35 percent expected rates to remain the same.
“For the first time in our National Housing Survey’s history, a greater share of consumers believe mortgage rates will decrease over the next year, rather than increase,” Doug Duncan, Fannie Mae’s chief economist, said in a note. “Consumers also expressed greater confidence in their job situations this month, another sign that housing sentiment may continue to improve in 2024.”
But those consumers were also worried about whether they will be able to buy even as mortgage rates drop.
“While home affordability may improve if actual mortgage rates continue moving downward, other parts of the affordability equation have yet to ease or improve for consumers,” Duncan said. “A large majority still think home prices will either increase or stay the same; the ‘good time to buy’ component continues to hover near its historical low.”
Mortgage rates hit 8 percent in October 2023, making securing a home loan the most expensive it has been since the turn of the century. Since then, rates have declined to the mid-6 percent range, a development that has sparked some activity among buyers.
This jump in interest has yet to translate into a selling spree, partly due to elevated prices.
On Thursday, the National Association of Realtors (NAR) pointed out that the median single-family used home price jumped 3.5 percent from a year ago to $391,700. Meanwhile, the payments that American households would pay on their mortgages if they put down 20 percent of a loan was 10 percent higher than a year ago at about $2,200.
“Many homebuyers have been shocked at high housing costs, with a typical monthly mortgage payment rising from $1,000 three years ago to more than $2,000 last year,” Lawrence Yun, NAR’s chief economist, said in a statement shared with Newsweek.
The rise in prices is partly due to a lack of enough supply of homes available for sale. This was a particular challenge in the used homes market, where sellers who own mortgages in the 2 to 3 percent range are reluctant to give them up with current costs of home loans high.
“While a lower mortgage rate path supports our forecast for a gradual increase in housing demand and sales activity in 2024, until we see a meaningful increase in housing supply, we expect affordability will remain a significant barrier to home ownership for many households,” Duncan said.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com