Consumer Expectations High For Housing, Low For Economy

By Daniel Duffield

Presently, consumer confidence in terms of the housing continues to increase, despite the lack of faith among Americans in the overall national economy.

With home prices and demand growing within select housing markets, consumer sentiment for the housing market has been increasingly positive. In contrast, the overall economy has left consumer confidence deflated, as a result of the automatic budget cuts which are now setting, said Fannie Mae in its February National Housing Survey.

On average, consumers anticipate a 2.9% increase in home prices over the next year, the most prominent increase in consumer confidence since the establishment of the survey in June 2010 and constituting a 0.5% rise from confidence measurements the previous month. Conversely, the amount of citizens who anticipate an improvement of their personal financial circumstances declined 2% to 41%.

According to Doug Duncan, senior vice president and chief economist at Fannie Mae, in spite of national financial difficulties and the lingering uncertainty of the U.S. political sphere, consumer confidence in the housing market remains strong and only continues to grow stronger.

The percentage of consumers who expect home prices to grow over the next twelve months reached a new high at 48%, while the percentage of consumers who expected depreciation of home prices remained stable at 10%.

Duncan stated that Fannie Mae anticipates a further solidification of home prices as the housing recovery remains strong, with the number of underwater consumers steadily declining and supplementing the amount of consumers who believe that it is an opportune time to sell.

According to the survey, 45% of consumers expect mortgage rates to go up in 2013, hitting the peak level since August 2011.

Since the historically low mortgage rates of September of 2012, the percentage of consumers who anticipate a rise in mortgage rates has increased noticeably, Duncan conveyed.

He added that, in spite of the record low mortgage rates of the last quarter of 2012, roughly half of borrowers never refinanced their home mortgage loans. Amidst expectations of interest rate increases coupled with the HARP deadline at the end of this year, Duncan believes that more borrowers will refinance soon to take advantage of the current, advantageous mortgage terms. As a result of these refinances, borrowers will potentially have a greater pool of disposable income, which could help to stimulate the economy somewhat.

Currently, 25% of consumers indicated that they believe now is a good time to sell, reaching a record high since the creation of the survey, the results demonstrated.

In terms of rental pricing, the average 12-month price change for consumer expectations grew 0.2% to 3.9% in February.

The Fannie Mae National Housing Survey took a poll of 1,008 Americans to determine their views toward homeownership and the real estate market in general.

Gretchen Wegrich

Gretchen Wegrich is an editor at Lender411. She specializes in mortgage basics, personal finance and green living. She graduated with a bachelor's degree in writing from University of California, San Diego and previously worked at the Santa Cruz Sentinel. Contact her at gretchen@lender411com.