A couple looks up at a condo for sale

Buyers are adjusting to a higher-rate environment 

While consumers are feeling less enthusiastic about the direction of mortgage rates, they “appear to be moving past the hurdle of last year’s sharp jump.”

April 9, 2024
2 minutes

Consumers are becoming more pessimistic about where mortgage rates are headed — but also more likely to adapt in order to buy a home.

That's one conclusion from Fannie Mae's Home Purchase Sentiment Index, which ticked downward in March by about a point to 71.9. While down this month, the overall index is up more than 10 points compared to a year ago.

Mortgage rate blues: It's the first monthly decline since November, mostly because 34% of consumers believe that mortgage interest rates will go up in the next 12 months. That's up from 32% in February and higher than the percentage who think rates will go down (29%).

Despite their mortgage rate moodiness, consumer perceptions about homebuying and selling conditions were slightly improved. While housing affordability continues to depress sentiment, there are signs that consumers are recalibrating expectations, said Doug Duncan, Fannie Mae's chief economist.

"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," Duncan said.

Rates in the real world: Consumer expectations are currently mirroring mortgage rate reality. Mortgage News Daily put the average 30-year mortgage at 7.11% on April 8, the highest level since mid-February. And last week's hotter-than-expected jobs report made it less likely that the Federal Reserve will start to cut rates in June.

In the meantime, inventory is continuing to gradually build, with homes actively for sale up 23.5% compared to a year ago. While it's still early in the spring homebuying season, the market is not yet showing signs of lagging buyer interest, said Danielle Hale, chief economist at Realtor.com.

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