Mike Fratantoni on the MBA’s mortgage market outlook

Fratantoni discusses the MBA's November forecast, which includes revised estimates for Q3 and Q4, as well as predictions for next year’s purchase market.

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Fannie Mae: Homeowners don’t think interest rates will increase

Attitude: Good time to buy, bad time to sell

The share of Americans who expect mortgage rates to go up in the next 12 months decreased again to 45%, reflecting a gradual but uneven decline since the beginning of the year.

Fannie Mae’s November 2014 National Housing Survey shows that Americans’ attitudes toward housing largely reflect the uneven 2014 housing market itself, which is improving but lagging behind the overall economic trend.

The news is a surprise, considering most every major mortgage finance economist is on record as saying interest rates will rise in 2015. The results of the Fannie Mae survey show just how disconnected economists are with consumers, and vice versa.

Consumers’ personal financial outlook increased during the year, lending support to the ongoing housing market recovery.

Americans increasingly don’t think mortgage rates will go up, contrasting with most economists who think it will.

On the other hand, the share of those who believe it is a good time to buy and sell a home moved further apart.

Sixty-eight percent of consumers now say it is a good time buy, an increase of 3 percentage points, compared to 39% who say it is a good time to sell, a 5 percentage point drop.

“November’s National Housing Survey results support the 2014 trend of gradual, but often sporadic and unspectacular, improvement across a range of indicators measuring consumer attitudes toward housing – mirroring the uneven recovery in housing activity this year,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “More encouraging is the steady upward trend this year in consumers’ assessment of their personal finances, with 46% of Americans – near the survey’s high – expecting their personal financial situation to improve over the next 12 months.

“We expect consumer attitudes toward housing to improve as the pickup in the overall economy lifts employment and income prospects. However, a sustained improvement in sentiment that could support a robust housing recovery, as policy support is removed, will require meaningful gains in household income. While such gains have so far been elusive, the strength in the November jobs report, which points to faster growth in labor income in the current quarter, marks a good start,” Duncan said

Here are the highlights of the November survey. 

Homeownership and Renting

  • The average 12-month home price change expectation fell to 2.6%.
  • The share of respondents who say home prices will go up in the next 12 months remained at 44%. The share who say home prices will go down decreased to 6%.
  • The share of respondents who say mortgage rates will go up in the next 12 months fell by 3 percentage points to 45%.
  • Those who say it is a good time to buy a house rose to 68%. Those who say it is a good time to sell fell by 5 percentage points to 39%.
  • The average 12-month rental price change expectation fell to 3.6%.
  • The percentage of respondents who expect home rental prices to go up in the next 12 months increased by 4 percentage points to 53%.
  • The share of respondents who think it would be difficult to get a home mortgage today decreased by 3 percentage points.
  • The share who say they would buy if they were going to move fell to 62%, while the share who would rent increased to 31%.

The Economy and Household Finances

  • The share of respondents who say the economy is on the right track fell 4 percentage points to 36%.
  • The percentage of respondents who expect their personal financial situation to get better over the next 12 months increased to 46%.
  • The share of respondents who say their household income is significantly higher than it was 12 months ago remained at 25%.
  • The share of respondents who say their household expenses are significantly higher than they were 12 months remained at 36%.

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