Despite historic lows in mortgage rates, potential home buyers are despondent and just about ready to throw in the towel, according to new survey data from federal lending giant Fannie Mae.
"The September survey showed a marked deterioration in consumer expectations of home prices over the next year — their weakest outlook since monthly tracking began in June 2010," said Doug Duncan, vice president and chief economist of the government-backed lending agency.
"Despite a decline in negative economic headlines during September — in contrast to their ubiquity during the debt-ceiling debate in August — consumers continue to demonstrate very negative attitudes," he said.
"At the same time, the share of consumers expecting mortgage rates to go up dropped sharply to the lowest level we have recorded, likely influenced by the news that the Federal Reserve will attempt to keep interest rates low for years to come."
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The average rate for a fixed 30-year home loan recently fell below 4 percent for the first time ever.
|(Getty Images photo)
Nevertheless, buyers are sitting on the sidelines. In addition, there are 1.6 million homes in the nation’s so-called “shadow” inventory, according to foreclosure web site RealtyTrac, homes not on the market yet unoccupied or otherwise in limbo.
That housing supply excess is running headlong into a market seemingly unable to pull the trigger even at rock-bottom prices along with cheapest-ever financing.
"The lack of a sense of urgency to buy homes, given expectations for further declines in home prices and continued low mortgage rates, coupled with general pessimism regarding their own personal finances and the economy, bodes poorly for the recovery of the housing market," Duncan said.
Don’t expect lending rates to shoot up soon. Federal Reserve Chairman Ben Bernanke is in the middle of his latest move to shoulder the crushing weight of a slowing U.S. economy, known in the press as Operation Twist.
Essentially a bond-swap, the $400 billion effort should lead to the equivalent of a half-point rate cut in the federal funds rate, Bernanke told Congress. It would lower long rates by 20 basis points, he estimated.
“It should help somewhat on job creation and growth. It is particularly important now that the recovery is close to faltering,” Bernanke said recently in testimony.
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