Only 71% of respondents to a recent survey believe buying property in their zip code is a good investment, down from 73.6% last year.

Potential homebuyers are getting discouraged by rising mortgage rates and home prices, according to a survey released by the New York Federal Reserve. US consumers expect mortgage rates to increase substantially over the next several years, with households on average projecting rates of 6.7% a year from now and 8.2% in three years, the survey shows.  The average probability of buying a home if a household moved over the next three years dropped sharply to 60.7% from 68.5% in 2021, marking the first decline since the annual housing survey started in 2014. Respondents said they still view home ownership as a smart financial investment, but the outlook weakened slightly. About 71% of respondents said they thought buying property in their zip code was a “very good” or “somewhat good” investment, down from the survey high of 73.6% seen last year.  US 30-year mortgage rates are surging this year and topped 5% last month for the first time in years.  Consumers expect home prices to keep rising even as borrowing costs increase. Respondents surveyed by the New York Fed said they anticipate home prices in their zip code to rise by 7% on average over the next year, up from the 5.7% growth expected last year. Renters aren’t anticipating any relief in the near term, either. Households said they see rents rising by 11.5% over the next year, up from 6.6% last year.

Source: Bloomberg