A survey of consumers by the nation’s central bank indicates increased expectations for rising home prices and interest rates.
The outlook for home-price growth over the next year among U.S. consumers has increased, according to the report.
Compared to current home values, house prices are expected to move up by 5.1 percent based on a mean of consumer expectations.
Those findings were outlined in the SCE Housing Survey from the Federal Reserve Bank of New York. The report details information on consumers’ housing-related experiences and expectations.
The expected increase turned out to be 1.8 percentage points more than in the 2016 survey and the
highest level since the inception of the survey in 2014.
The average probability that home prices will decrease fell to 37.5 percent from 43 percent in the 2016 survey.
The report indicated that positive attitudes toward housing continued, with 60.4 percent of all
respondents believing that buying a property in their zip code is a very or somewhat good investment. Just 12.7 percent think it is a bad investment.
Also increasing were expectations for higher interest rates.
On average, consumers estimate that mortgage rates have risen between 40 and 50 basis points since 2016 — roughly in line with actual rate.
Among less-educated and lower-income households, rate increases have been perceived as larger.
“The average year-ahead mortgage rate expectation was 5.6 percent, up from 5.2 percent in 2016,” the report stated. “The average probability that mortgage rates will increase over the next year rose from 49.5 percent in 2016 to 52 percent; this is primarily driven by older respondents (ages 50 or older).”
Perceived rate increases have driven down the average probability of refinancing over the next year to 10.2 percent from 11.3 percent a year earlier.
Consumers who currently rent their residences perceive access to mortgage credit as improved as conditions continue to ease.
