Posted June 11, 2014

Consumers Predict Higher Mortgage Rates For Next Year — Just Like They Always Do

Fannie Mae survey shows that U.S. consumers believe it

Fannie Mae survey shows that U.S. consumers believe it's a good time to buy a home

According to a Fannie Mae survey, 93% of U.S. consumers believe home prices will rise between now and 2015; with the average consumer believing values will rise 3 percent annually.

The survey is the latest in a series of signals which signal a shift in consumer attitudes. With mortgage rates low and home prices rising, the market is ripe for buyers to find a good deal.

See what today's mortgage rates look like.

68% Of Consumer Say "It's A Good Time To Buy"

Each month, Fannie Mae conducts a National Housing Survey. The agency speaks with 1,000 households nationwide about the state of the U.S. housing market.

Survey results from May show consumers overwhelmingly bullish on the future of housing, with 68% of those surveyed said now is "a good time to buy a home".

It's easy to understand the optimism. 

As compared to one year ago, home values in many U.S. cities are up 10 percentage points or more, with some areas experiencing growth of 20% or more. The housing market's recovery has been national news of late.

Hard-hit cities during last decade's downturn have led this decade's rebound.

Phoenix, Arizona; San Francisco, California; and Los Angeles are three notable markets in which single-family home values have climbed by more than twenty percent. Condos are faring even better.

A sampling of recent statistics demonstrates how much U.S. housing has improved.

  • Existing home supply remains in bull market territory
  • New home sales continue to expand, even as prices are rising
  • Mortgage lenders, exhibiting confidence in housing, are expanding loan guidelines

Furthermore, with mortgage rates near 12-month lows, some U.S. lenders now quote rates in the 3s. When mortgage rates are low, home purchasing power is stretched.

Today's home buyers can afford 6% more home as compared to the start of 2014.

Get today's mortgage rates.

Just 5% Expect Mortgage Rates To Drop

The May 2014 Fannie Mae Housing Survey asks consumers "Do you expect mortgage rates to go up, go down, or stay the same in the next 12 months?"

Just 5 percent expect mortgage rates to drop - roughly the same percentage as for each of the last 12 monthly surveys. Yet, as compared to one year ago, mortgage rates are lower which suggests that consumers aren't so good about predicting the future of mortgage rates.

In 2009, when mortgage rates fell below 6 percent, everyone knew it was the lowest rates would get.

In 2010, when mortgage rates fell below 5 percent, everyone knew it was the lowest rates would get.

In 2012, when mortgage rates fell below 4 percent, everyone knew it was the lowest rates would get.

And now, it's 2014, and mortgage rates have failed to make any meaningful increase. Rates still hover near 4.25% and home affordability remains high. Even as the Federal Reserve winds down its stimulus, rates have remain stubbornly low.

Consumers, though, still expect that rates will climb quickly. It may account for a second reason why two-thirds of respondents said "now is a good time to buy a home". When mortgage rates rise, buyers can afford "less home".

Every 1 percentage point rise in mortgage rates lowers a buyer's maximum purchase price by 11%.

Rising mortgages rates can mean the difference between buying a 4-bedroom home or three-bedroom home; between a 3-bathroom home or a two-bathroom one; between living in a top-rated school district or a second-tier one.

Should current mortgage rates begin climbing, it will cost more to own a home. Thankfully, buyers have access to a multitude of low- and no-downpayment mortgage options including the 100% USDA mortgage, the no-money-down VA loan, and the 3.5%-down FHA loan.

Furthermore, via the FHA Homeowners Armed With Knowledge (HAWK) program, first-time home buyers can get access to reduced FHA MIP. 

Get Rates. See How Much You Can Afford.

For today's home buyers, the improving economy is moving home prices higher and holding mortgage rates down -- an unexpected and welcome development. Purchasing power is extending as home values climb nationwide.

Plan for your upcoming purchase. Get today's mortgage rates and find out how much home you can afford. Rates are available online at no cost, with no obligation to proceed, and with no social security number required to get started.

Click for today's mortgage rate quotes.

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

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2014 Conforming & FHA Loan Limits

Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.