Consumers expect mortgage rates to go up in the next year, but Fannie Mae expects a 'thaw' in the housing market

By Aarthi Swaminathan

A third of consumers believe mortgage rates will go up over the next 12 months

Consumer sentiment towards housing fell in March, but signs point to home buyers and sellers making peace with higher mortgage rates and home prices, a new survey says.

The sentiment was measured by a monthly survey by Fannie Mae FNM (FNMA). The monthly Home Purchase Sentiment Index fell 0.9 points in March to 71.9, registering the first decline since November 2023. The HPSI uses information from Fannie Mae's National Housing Survey which goes back to 2010.

The increase was primarily due to a gloomy outlook over mortgage rates which consumers expect will increase over the next year, the government-sponsored enterprise said on Wednesday.

In March, 79% of respondents said it was a bad time to buy a home, down from 81% the previous month.

Also down by 2 basis points, 40% of respondents believe home prices will go up in the next 12 months. The median price of a resale home in November was $384,500, according to the National Association of Realtors.

And 34% said they believe mortgage rates will go up over that time period, up from 32% the previous month. The 30-year fixed-rate mortgage is averaging at 6.82% as of April 4, according to Freddie Mac.

Nonetheless, the survey indicated that the pessimism over the housing market was fading, Fannie Mae said.

"We're seeing signs that consumers may be adjusting their expectations for the housing market to better accommodate the higher mortgage rate and home price environment," Doug Duncan, chief economist and senior vice president at Fannie Mae, said in a statement.

"With the historically low rates of the pandemic era now firmly behind us, some households appear to be moving past the hurdle of last year's sharp jump in rates, an adjustment that we think could help further thaw the housing market," he added.

Home sellers remain optimistic about the market, as 66% of respondents said it's a good time to sell a home, up from 65% the previous month.

-Aarthi Swaminathan

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04-08-24 0859ET

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