Mortgage | Fed Actions Drive Mortgage Rate Expectations

February 8, 2012 – 1:24 am

WASHINGTON, Feb. 7, 2012 /PRNewswire/ –The majority of Americans continue to expect no change in mortgage rates over the next 12 months, according to results from Fannie Mae’s January 2012 National Housing Survey. At the same time, their expectations for home prices have improved for the fourth month in a row, with respondents expecting prices to go up by 1.0 percent, on average, during the year. Consumer sentiment is improving from its depressed level last summer, with current attitudes very similar to those of a year ago. Forty-four percent of respondents expect their personal financial situation to improve, up from 40 percent a month ago, and 30 percent of Americans believe the economy is on the right track, up from 22 percent last month and up for the third straight month since November 2011.

“Consumer sentiment has continued to rebound to the level witnessed around a year agosince hitting a setback last summer. The strengthening employment picture last Friday provides encouragement that the improving trend in consumer confidence will continue and will at some point be reflected in a firming up of consumer spending,” said Doug Duncan, vice president and chief economist of Fannie Mae. “That rebound may be slow in coming as consumers still seem to be deleveraging and aren’t yet fully confident of their household finances.”

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“The Federal Reserve’s pledge to keep interest rates lowbeyond2014, extending their prior time frame of mid-2013 announced in the summer, appears to have been reflected in the rising share of consumers expecting the rate to remain near record low levels for another year,” Duncan stated. “At the same time, consumers expect home prices to rise over the next year, extending the streak of rising home price expectations to four months. If the employment market continues tostrengthen, it is unlikely that the Fed will be able to keep its low interest pledge for long, and a more meaningful housing recovery may not be far behind if consumers are faced with the prospect of rising mortgage rates and home prices amid increased job security.”

SURVEY HIGHLIGHTS

Homeownership and Renting

On average, Americans expect home prices to increase by 1.0 percent over the next 12 months, continuing the upward trend started in October 2011.

Twenty-eight percent of respondents expect home prices to increase over the next 12 months (up 2 percentage points since last month), while 16 percent say they expect home prices to decline (down 2 percentage points since last month). Fifty-one percent say prices will stay the same.

Only 8 percent of Americans say that mortgage rates will go down in the next 12 months, down 2 percentage points from December.

The percentage of respondents who say it is a good time to buy stayed at 71 percent this month, while the percentage who say it is a good time to sell dropped by 1 percentage point to 10 percent.

On average, respondents expect home rental prices to increase by 3.2 percent over the next 12 months, down from 3.5 percent in December.

The same percentage of respondents as last month say rental prices will go up

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