Rising mortgage rates dampened consumer sentiment toward the housing market in September, pushing Fannie Mae’s Home Purchase Sentiment Index to a score of 87.7, a decrease of 0.3 percentage points compared with August.
As was expected, the Federal Open Market Committee hiked the Fed Funds rate another 0.25% in September, which may have led some consumers to the false impression that mortgage rates would increase correspondingly.
The share of survey respondents who expect mortgage rates to go down over the next 12 months fell four percentage points.
In addition, the net share who say their household income was significantly higher than it was 12 months earlier decreased three percentage points.
Respondents also expressed a slightly more pessimistic view on job security, with the net share confident about not losing their job falling by one percentage point.
The net share of Americans who say September was a good time to buy a home rose by five percentage points, while the net share who say it was a good time to sell a home remained unchanged.
Finally, the net share of respondents who say that home prices will increase in the next 12 months increased one percentage point.
In a statement, Doug Duncan, senior vice president and chief economist at Fannie Mae, says “perceptions of high home prices and expectations for rising mortgage rates continue to weigh on potential homebuyers.”
“In September, the average 30-year fixed mortgage rate increased for the second consecutive month to 4.63 percent, its highest level since May 2011,” Duncan says. “In addition, the Federal Open Market Committee members’ interest rate projections at the September meeting continued to point to four additional rate increases between now and the end of 2019.
“Still, downside risk to housing is limited by broader economic strength, which helped boost perceptions of current home buying conditions,” he adds. “For consumers who say now is a good time to buy, the share citing overall economic conditions as a reason rose to a survey high.”