Americans Are More Confident About The Housing Market
NEW YORK ( MainStreet) -- After housing woes shocked the economy in 2008, consumers are slowly becoming more confident about the housing market.
According to Fannie Mae's National Housing Survey from June, 70% of respondents say it is a good time to buy a home, while consumers' average 12-month home price change expectation stands at 2.4%.
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"Since we began collecting monthly National Housing Survey data in June 2010, we've seen substantial progress in consumer home price expectations and other key attitudinal measures as the housing recovery gained its footing," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Still, we do not expect to see 'normal' levels of new residential construction, in the region of 1.6 million new housing units per year, before the end of 2016, our original projection. Such a feat would require a pace of growth in housing starts not seen in decades."
Housing starts, which account for the number of new homes under construction, fell 9.3% in June to a seasonally adjusted annualized rate of 893,000, according to a Commerce Department report last week. These figures remain up 7.5%, year-over-year.
There are bright spots to the housing market. The National Association of Realtors on Tuesday said sales of existing single-family homes jumped 2.6% in June to an annualized rate of 5.04 million homes.
"Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country," said Lawrence Yun, the National Association of Realtor's chief economist. "This bodes well for rising home sales in the upcoming months as consumers are provided with more choices."
The Fannie Mae survey also revealed consumers' attitudes towards mortgage rates. Some 55% of respondents said mortgage rates will rise in the next year, up 6% since the same survey in May.
The chatter surrounding interest rates increases is heating up, as the Federal Reserve dials back its bond stimulus, known as quantitative easing, which has kept interest rates low in order to spur economic growth. On that note, the central bank is grappling with when to raise short-term interest rates, which have remained near zero since December 2008, especially as inflation inches higher.
The Bureau of Labor Statistics on Tuesday said the consumer price index rose 0.3% in June and is up 2.1% over the past year. The Fed's inflation target is 2%. Even though rate hikes aren't expected until mid-2015, higher borrowing costs for banks would eventually make its way to consumers' wallets.