Consumer outlook on housing growth may have plateaued as concern grows over the potential tapering of the Federal Reserve’s bond-buying program, according to a new report by Fannie Mae.
American consumers’ outlook on the housing market had been trending upward all year. However, according to the results of Fannie Mae’s August National Housing Survey, consumers are now expecting home price gains to slow over the next 12 months. That puts consumer attitudes well in line with recent market trends, according to Fannie Mae Senior Vice President and Chief Economist Doug Duncan.
“The spike in mortgage rates associated with the possibility that the Fed will begin to wind down its asset purchase program later this month has dampened the improving trend in consumer sentiment regarding housing witnessed in our survey since the start of this year,” Duncan said. “The pause in positive momentum is consistent with slowing trends in home purchase contract signings and mortgage applications. Interest rate volatility will likely remain elevated, even after we have more clarity on the pace of the Fed's tapering, due to concerns over the upcoming budget and debt ceiling debates as well as the crisis in Syria.”
According to the study, consumers expect home prices to increase 3.4% over the next 12 months, down 0.5% from last month. The share of consumers who say it’s a good time to buy a home fell by three percentage points to 71%, while the number of people who say it’s a good time to sell fell four percentage points to 36%.
Meanwhile, the share of consumers who expect mortgage rates to go up in the next 12 months was 60%, up two percentage points from the previous month.