In March, consumers appeared less optimistic about the possibility of lower mortgage rates, reflecting a broader trend of shifting expectations in the housing market. Recent data suggests a potential uptick in mortgage rates, leaving many prospective buyers and homeowners feeling uneasy.
According to weekly Freddie Mac data, mortgage rates have remained steady between approximately 6.6% and 7% since the beginning of the year. Last week, the average 30-year fixed rate climbed to 6.82%, and further increases may be on the horizon.
The 10-year Treasury yield, a key indicator for mortgage rates, has risen by 0.058 percentage point since the previous week's close. This trend suggests that this week's mortgage rate reading, scheduled for release on Thursday, may approach the 7% mark.
Builder stocks experienced a slight decline, with the iShares U.S. Home Construction exchange-traded fund dropping 0.5% on Monday morning. This contrasts with the flat performance of the S&P 500 index.
The latest housing market sentiment survey by Fannie Mae, released on Monday, indicates that most respondents anticipate either stable or rising mortgage rates over the next 12 months. This marks a shift from February, when the majority expected a decrease. Fannie Mae's overall sentiment index saw a 0.9-point decline in March, its first since November.
Economists are also adjusting their forecasts upwards, suggesting that mortgage rates may not decline as initially anticipated by the end of the year, according to Barron's.
Fluctuations in the 10-year Treasury yield are attributed to changing expectations regarding the economy, the Federal Reserve, and inflation. Investors are closely monitoring key price gauges, including Wednesday's consumer price index and Thursday's producer price index, for insights into inflation trends. Higher-than-expected readings could drive Treasury yields—and subsequently mortgage rates - higher, while indications of cooling inflation could lead to declines.
Mortgage rates have played a pivotal role in shaping the housing market in recent years. Historically low rates fueled a surge in home sales and prices. However, significant rate hikes in 2022 and 2023 led to a slowdown in activity, resulting in the lowest existing-home sales in nearly three decades, according to National Association of Realtors data.
Despite growing pessimism, there's a slight uptick in the percentage of consumers who view it as a good time to buy, rising from 19% to 21% - the highest level since June, though still relatively low compared to historical data.
Doug Duncan, Fannie Mae's chief economist, commented, "We're seeing signs that consumers may be adjusting their expectations for the housing market to better accommodate the higher mortgage rate and home price environment. With the historically low rates of the pandemic era now firmly behind us, some households appear to be moving past the hurdle of last year's sharp jump in rates, an adjustment that we think could help further thaw the housing market."
The evolving landscape of mortgage rates and housing market sentiment underscores the need for consumers to stay informed and adapt to changing conditions as they navigate the real estate market.