In the wake of a month where consumers’ confidence in home prices remained strong even as mortgage rates leaped, more Americans may rush to buy in order to capitalize on still favorable market conditions, Fannie Mae’s chief economist said about the results of Fannie Mae’s June 2013 National Housing Survey.
“The spike in mortgage rate expectations this month seems to have had an impact on a number of the survey’s indicators and may increase housing activity in the near term by driving urgency to buy,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.
“Consumers may recognize that today’s still favorable mortgage rates and homeownership affordability levels will recede over time. Given rising home and rental price expectations and improving personal financial attitudes, more prospective homebuyers may be deciding that now is the time to get off the fence.”
With the average rate on a 30-year fixed-rate mortgage rising by well over one percentage point from early May to the end of June, the share of consumers who believed mortgage rates will increase jumped by 11 percentage points to a record high of 57 percent in June, according to Fannie Mae’s survey.
But despite growing belief in a development that would chip away at affordability, the survey still found that the share of respondents who believed home prices will go up in the next year hit a survey high of 57 percent, while those who believed that home prices would go down remained flat at a survey low of 7 percent.
Still, the average 12-month home price change expectation fell marginally from last month’s survey high of 3.9 percent to 3.8 percent, Fannie Mae reported.
Likely reflecting a recognition that rising mortgage rates may erode affordability, the share of survey respondents who believe that now is a good time to buy fell from 76 to 72 percent, while the share who say now is a good time to sell dropped from 40 to 36 percent.
Though increasing rates could spur some buyers to pull the trigger, today’s inventory shortage could continue to hold back home sales, Trulia Chief Economist Jed Kolko recently tweeted.
“People might want to buy before rates rise, but tight inventory makes it hard to find what you want fast,” he said.