Posted October 10, 2014

Do You Know What’s Next For Mortgage Rates? 960 Out Of 1,000 Consumers Guessed Wrong Last Year.

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

Current mortgage rates are at a 16-month best and demand for homes is as high as it's been in a year. Now, with home prices continuing to rise nationwide, U.S. consumers are wondering whether the best deals in housing are about to vanish for good. 

According to a recent Fannie Mae survey, 87% of U.S. consumers said home prices are as low as they're going to get over the next twelve months. The average expectation is that home values will rise 2.2 percent over the next year.

This might not seem like much, but the same consumers said average rents will rise by more than 2.2%, meaning that buying a home could be a better play than renting for the foreseeable future. It's one reason nearly 7-in-10 consumers said they'd buy a home if they were going to move

Just 3-in-10 said they'd rent. 

The Fannie Mae is the latest in a series of signals which indicate a shift in consumer attitudes toward housing. With mortgage rates low and home prices rising, today's housing market may be at its most ripe for bargain-savvy buyers.

Some mortgage lenders now quote rates in the 3s.

Get a live mortgage rate quote now.

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

Each month, Fannie Mae conducts its National Housing Survey. To gather data, the agency speaks with 1,000 households, comprised of homeowners and renters, about the state of the U.S. housing market.

The September survey results show U.S. consumers overwhelmingly bullish on housing. 68% of those surveyed said now is "a good time to buy a home". It's not tough to see why. 

As compared to two years ago, in many U.S. cities, home values are up more than 10 percentage points and the housing market's steady recovery has been a national news story since late-2012.

The hardest-hit cities of 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 thirty percent from lows. Condos in these markets have fared even better.

There is hardly a housing metric which doesn't show solid annual growth.

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

Furthermore, with mortgage rates near 16-month bests, many U.S. lenders now quote rates in the 3s. With mortgage rates low, purchasing power is stretched and home affordability is high.

Today's home buyers can afford 8% more home as compared to the start of the year.

Get today's mortgage rates.

Just 5% Expect Mortgage Rates To Drop

Current mortgage rates are low. According to Freddie Mac's weekly Primary Mortgage Market Survey (PMMS), today's 30-year fixed-rate mortgage rates is near its lowest point of the year and its best levels since last June.

But, it's not just conventional mortgage rates which are dropping.

Since the start of the year, mortgage rates for FHA loans, VA loans and USDA loans are down approximately one-half percentage point, too. All mortgages are getting cheap.

According to Fannie Mae, though, consumers expect that low rates will soon end.

Among the questions in the Fannie Mae Housing Survey is: "Do you expect mortgage rates to go up, go down, or stay the same in the next 12 months?" In the September survey, just 5% said mortgage rates will drop.

Last year, four percent said rates would drop. As it turns out, these 40 consumers were the only ones who got it right -- the other 96% guessed wrong. Mortgage rates are currently lower than they were one year ago.

For all the talk that "current mortgage rates can't stay low forever", rates have continually dropped since 2009. 

In 2009, current mortgage rates were at 6 percent. Everyone said it was the bottom.

Then, in 2010, current mortgage rates were at 5 percent and everyone said it was the bottom. Then, in2012, current mortgage rates were at 4 percent and -- again -- everyone said it was the bottom.

Wrong, wrong, and wrong again. And, now, its 2014, and mortgage rates continue to fall. Consumers are now locking rates and APRs in the 3s and home affordability is increasing.

Yet, consumers say rates have bottomed.

The expectation of rising mortgage rates may be one of the reasons why 68% of respondents said "now is a good time to buy a home". Rising mortgage rates affects how much home you can afford -- every 1 percentage point increase to mortgage rates lowers your maximum purchase price by 11%.

Rising 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.

When mortgage rates rise, it will cost more to own a home.

Thankfully, buyers have access to a multitude of low- and no-downpayment mortgage loans including the 100% USDA mortgage, the no-money-down VA loan, and the 3.5%-down FHA loan.

In addition, via the FHA Homeowners Armed With Knowledge (HAWK) program, soon, 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 even as home values climb.

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

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.