With a heavy amount of intervention from the Federal Reserve, the real estate market has rebounded from its worst levels of the Great Recession. Low interest rates and higher prices have played a major role in the housing-recovery story, but recent changes have many Americans believing affordability will decrease.
Mortgage rates have been on the rise over the past several weeks. As a result, potential homebuyers may enter the market sooner than expected. According to a new survey from Fannie Mae, the number of respondents who believe mortgage rates will increase over the next year jumped 11 percentage points from May to hit 57 percent in June, the highest level in the survey’s three-year history. People expecting home prices to increase over the same period also hit a survey high of 57 percent. Only 7 percent believe prices will decline.
“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.”