Regularly, Consumers Underestimate How Fast Home Prices Climb

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Fannie Mae Surveys 1,000 U.S. Consumers current mortgage rates low, millions of U.S. homeowners are potentially eligible to refinance.Few are actually doing it, however — and a Fannie Mae survey may explain why.

According to Fannie Mae’s monthly National Housing Survey, nearly half of surveyed consumers think it would be “difficult” to get a mortgage approved. As a result, many decide never to apply.

But, getting approved is not difficult at all. At least, not statistically.
Since the start of 2014, U.S. lenders been loosening home loan guidelines so that, today, according to Ellie Mae, two-thirds of refinance mortgage applications get the go-ahead and more than 72% of purchase mortgage applications do.
Both are all-time highs since such data has been tracked.

With FHA loansavailable for borrowers with credit scores of 580 and higher; and with conventional loans requiring less paperwork, not since 2008 has it been so easy to be mortgage-approved.

Home Values Rise More Than Consumers Expect
Each month, Fannie Mae conducts a survey of 1,000 U.S. households, measuring how consumer opinion has changed on housing, mortgages, and the economy; and, which asks consumer to predict what market will look like in one year’s time.

Not surprisingly, consumer expectations are rarely in line with reality. What’s surprising, though, is how “wrong” consumers can sometimes be.
For example, one year ago, consumers told Fannie Mae that they expected home prices to rise 2.5% over the next twelve months. Values gained more than twice that, it turned out.

Similarly, last year, 93% of surveyed consumers said mortgage rates were at “a bottom”. In the 12 months since, however, rates have been mostly unchanged, and oftentimes lower.
Predicting the future is difficult and now, according to the December 2015 National Housing Survey, U.S. consumers expect home values to rise 2.6% between this year and next.
Yet, data suggests values will rise more in 2016.

Home supply is tight and demand for homes is strong, led by low-downpayment loans such as the HomeReady™ mortgagefrom Fannie Mae and the 100% financed USDA loan Today represents an opportunity to buy homes on the cheap. It appears as if home sellers are underestimating how much they can ask for their homes.

Confidence is down, too.
More than 40% of home sellers think now is “a bad time to sell”, which may suggest that sellers are feeling the pain of the winter housing market; or, that home showings are slowing as the weather turns colder.

It’s in markets like this that “great deals” can be found.
Mortgage Rates Will Rise In 2016, Consumers Say
In addition to asking about future home prices, Fannie Mae’s survey also asks consumer to forecast the future of U.S. mortgage rates.

Similar to our expert mortgage prediction panel

, just 4% of those surveyed expect mortgage rates to be lower next year. Not surprisingly, this is similar to what consumers have said since 2011.
In most years, they’ve been wrong.

Aside from a spike from May-September 2013, and a recent run to close out December, mortgage rates have been on a slow, steady decline dating back five years.

Current 30-year mortgage rates are below four percent for buyers paying discount points. Zero-closing cost mortgage rates are only slightly higher.
There are a host of refinance opportunities, too. With mortgage rates low:

If you’ve been exploring the idea of a refinance, get competing quotes — especially if your loan is backed by the FHA. FHA mortgage lending is getting aggressive and there is money you can save.