U.S. consumers expect mortgage rates to approach double digits over the next three years, according to a new survey by the New York Federal Reserve.
Households have a gloomy view of mortgage rates. Consumers on average said that over the next year, they expect the 30-year mortgage rate to rise to 8.7%, and in three years, to 9.7%, “both of which are series highs,” the NY Fed said.
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But some are holding on to the hope that they’ll fall: Households on average believe there is a 61% chance that rates will fall over the next 12 months, the Fed said, which is also a series high.
The rate on the 30-year mortgage averaged 7.28% as of Friday afternoon, per Mortgage News Daily. Last October, the 30-year crossed 8%, which pushed affordability to a 38-year low.
The New York Fed survey, released Monday, is focused on housing and is part of the broader Survey of Consumer Expectations. It collected data on consumers’ experiences, behaviors, and expectations related to housing. The housing portion of the survey has been fielded annually since 2014. The survey was fielded in February 2024.
Americans also believe that home prices will rise over the next year by 5.1%, up from 2.6% in February 2023. And over the next five years, people expect home prices to grow by 2.7%.
Those surveyed said they expect rent prices to increase by 9.7% over the next year, and by 5.1% over the next five years.
The median home-sale price as of April 28 was a record $383,000, according to a report from real-estate brokerage company Redfin RDFN. Prices are up 4.8% from last year, as the market deals with persistently low housing inventory.
Rent prices only rose 0.5% in April, according to data from Apartment List, to $1,396. The pace of growth has slowed significantly over recent months as the number of homes for rent has increased.
High prices and mortgage rates are discouraging people from moving. The likelihood of people moving to a different primary home fell to a low, the NY Fed said.
Renters were also downbeat on their chances of becoming homeowners, as 74.2% of renters said they had trouble obtaining a mortgage. That’s an 8.4 percentage point increase from last year.
Only 40.1% of renters said they would ever own a home — down by 4.3 percentage points — and marks a low low.