Americans Expect Home Prices and Mortgage Rates to Increase

March 07, 2013

Attitudes About Economy and Household Finances Remain Flat

Pete Bakel

202-752-2034

WASHINGTON, DC – Consumer attitudes toward the economy and housing continue to diverge this winter, according to Fannie Mae’s February 2013 National Housing Survey results. On the one hand, consumers continue to express strong positive attitudes toward housing. On the other hand, sentiment about the economy and household finances is stalled. Average 12-month home price expectations and the share of consumers who believe home prices will go up over the next year both rose to record highs, and the percentage of Americans who say mortgage rates will rise reached its highest level since August 2011. At same time, Americans’ views on their personal financial situation, household income, and the direction of the economy fell or remained flat.

“Despite fiscal headwinds and political uncertainty, consumer sentiment toward housing is robust and continues to gather strength,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “We expect home prices to firm further amid a durable housing recovery, gradually reducing the population of underwater borrowers and helping to boost the share of consumers who say that now is a good time to sell."

“Since reaching its trough last September, the share of consumers expecting mortgage rates to rise has trended up,” continued Duncan. “However, despite historically low mortgage rates, nearly half of borrowers have never refinanced their mortgage. Combined with the scheduled year-end HARP deadline, rising rate expectations should prompt some borrowers to refinance soon to take advantage of more favorable mortgage terms and add to their disposable income, helping to offset ongoing fiscal drag.” 

SURVEY HIGHLIGHTS

Homeownership and Renting

• The average 12-month home price change expectation increased 0.5 percent over last month to 2.9 percent, the highest level since the survey’s inception.
• At 48 percent, the share who believe home prices will go up in the next 12 months also reached a survey high, while the share who believe home prices will go down held steady at the survey low of 10 percent.
• The percentage who think mortgage rates will go up increased by 4 percentage points to 45 percent, the highest level since August 2011, while those who think they will go down held steady at 7 percent.
• Twenty-five percent of respondents say it is a good time to sell a house, the highest level since the survey’s inception in June 2010.
• At 3.9 percent, the average 12-month rental price change expectation increased 0.2 percent over January.
• Fifty percent of those surveyed say home prices will go up in the next 12 months, holding steady from January at the highest level since the survey’s inception.
• The share of respondents who said they would buy if they were going to move increased by 2 percentage points to 67 percent.

The Economy and Household Finances

• At 38 percent, the share of respondents who say the economy is on the right track has held steady over the past three months.
• The percentage who expect their personal financial situation to get better over the next 12 months fell by 2 percentage points to 41 percent.
• Twenty-one percent of respondents say their household income is significantly higher than it was 12 months ago, a 2 percentage point decrease from last month.
• Thirty-one percent report significantly higher household expenses compared to 12 months ago, a 7 percentage point decrease and the lowest level since June 2010.

The most detailed consumer attitudinal survey of its kind, the Fannie Mae National Housing Survey polled 1,008 Americans via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts (findings are compared to the same survey conducted monthly beginning June 2010). Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future.

For detailed findings from the February 2013 survey, as well as a podcast providing an audio synopsis of the survey results and technical notes on survey methodology and questions asked of respondents associated with each monthly indicator, please visit the Fannie Mae Monthly National Housing Survey site. Also available on the site are quarterly survey results, which provide a detailed assessment of combined data results from three monthly studies. The February 2013 Fannie Mae National Housing Survey was conducted between February 2, 2013 and February 21, 2013. Interviews were conducted by Penn Schoen Berland, in coordination with Fannie Mae.