After years of feeling priced out of the market, potential homebuyers are feeling optimistic again, according to a new report. But that optimism is directly tied to the hope that the Federal Reserve will cut interest rates this year.
For the average American, buying a home has felt impossible during the past couple of years. But potential buyers are feeling hopeful about their chances in 2024.
Fannie Mae’s Home Purchase Sentiment Index increased 2.9 points in December, to 67.2. Fannie Mae also reports that 17% of consumers now believe it’s a good time to buy a home — that’s up from 14% the previous month.
This is all thanks to hopes that the Federal Reserve will start cutting interest rates this year, which could lead to lower mortgage rates.
In fact, they’ve already started dropping by nearly one full percentage point since October, to an average of 6.62% for a 30-year fixed rate mortgage last week.
Mark Palim, vice president and deputy chief economist at Fannie Mae, said, "Mortgage rate optimism increased dramatically this month, with a survey-high share of consumers anticipating mortgage rate declines over the next year." But he added, "Notably, homeowners and higher-income groups reported greater rate optimism than renters."
Palim went on to say that while lower rates would make it a little easier, experts still anticipate home prices to stay flat throughout the year, meaning affordability isn’t expected to get within reach of all types of buyers.
Mortgage and rent prices are expected to decrease this year
Median asking rents grew more than 20% over three years, spiking to more than $2,000 a month twice in the past two years.
