Most Americans believe home prices will continue to decline over the next year, according to a recent survey from mortgage finance company Fannie Mae, and consumers are more pessimistic on most financial issues today than they were a year ago.
The September Fannie Mae survey found that respondents now think home prices will fall an average of 1.1 percent by this time next year. That’s a much larger decline prediction than the 0.5 percent from August.
“The September survey showed a marked deterioration in consumer expectations of home prices over the next year–their weakest outlook since monthly tracking began in June 2010,” said Doug Duncan, vice president and chief economist of Fannie Mae in a press release. “Despite a decline in negative economic headlines during September…consumers continue to demonstrate very negative attitudes. At the same time, the share of consumers expecting mortgage rates to go up dropped sharply to the lowest level we have recorded, likely influenced by the news that the Federal Reserve will attempt to keep interest rates low for years to come.”
In this latest survey, only 33 percent of consumers believe that mortgage rates will rise in the next 12 months, down from 45 percent in August. The sentiments could have been influenced by the Federal Reserve’s recent decision to bring long-term rates even lower.
In terms of the greater economy, 77 percent of respondents felt that the U.S. economy is on the wrong track. While that is down slightly from 78 percent the month before, it is still an overwhelming negative outlook and that will likely translate into personal spending choices.
As Duncan commented,
“The lack of a sense of urgency to buy homes, given expectations for further declines in home prices and continued low mortgage rates, coupled with general pessimism regarding their own personal finances and the economy, bodes poorly for the recovery of the housing market.”