Americans haven’t felt this optimistic about the housing market in 20 months, a new survey found, but still-high home prices may threaten to blunt that re-emerging confidence.
Fannie Mae’s gauge of housing sentiment jumped 2.9 points in December to 67.2, its highest level since April 2022. The boost was driven by increased optimism that mortgage rates will soften over the course of the new year.
In December, a survey-high 31% of consumers said they expect rates to fall within the next 12 months, up from 22% the month prior and 16% in October. Overall, the full confidence index was up 6.2 points year over year.
A third of Americans expect rates to drop further this year
After reaching its peak of 7.79% in October, the average on the popular 30-year fixed rate mortgage plunged more than a full point by December and now stands at 6.62%, per Freddie Mac.
The dramatic decline in rates occurred as signs of cooling inflation in recent months fueled market expectations that the Federal Reserve would lower its fed funds rate, which has held at a 22-year high since July to combat inflation.
In December, the central bank signaled up to three rate cuts in 2024, which would bring the Fed’s target interest down to 4.6% — compared to its current 5.25% to 5.5% range.
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