The positive outlook on home prices was further strengthened in Fannie Mae’s most recent housing survey.
In the October survey, respondents raised their expectation for home price growth in the next 12 months to 1.7 percent, up from 1.5 percent in September. In October 2011, consumers expected prices to fall by 0.3 percent.
In addition, only 10 percent of respondents expect home prices to drop during the same one-year period, and 36 percent say prices will go up and 48 percent say they will stay the same.
“This has been a year of steady growth in the percentage of consumers with positive home price expectations,” said Fannie Mae chief economist Doug Duncan in a release.
Consumers’ placed even more confidence in rent prices, stating they expect prices to rise by an average of 3.9 percent in the next 12 months, up from 3.1 percent in September. A mere 3 percent expect rent prices to go down, and 50 percent expect rent prices to move higher.
“Increasing household formation, encouraged by an improving labor market, is adding additional momentum to the housing recovery and putting upward pressure on rental price expectations. Expected increases in both owning and renting costs may encourage more consumers to buy and add further strength to the housing recovery already under way,” Duncan added.
Even though home prices have been on the rise, a large majority of consumers still think it’s a buyer’s market, with 72 percent stating now is a good time to buy. If respondents were to move, 66 percent said they would buy, a drop in 3 percentage points from the month before. Less than a third, 29 percent, say they would rent.
After a steep decline in September, the percentage of respondents who say mortgage rates will go up rose to 37 percent in October from 33 percent the month before. Only 7 percent believe rates will fall further.
Most respondents, 56 percent, say they think the economy is heading in the wrong direction, while 38 percent believe the economy is on the right track.
Less than half, or 43 percent of respondents, expect their financial situation to improve in the next 12 months, while 13 percent expect their situation to worsen.
Nineteen percent of respondents reported significantly higher household income compared to 12 months ago, a small increase from 17 percent last month. Sixty-four percent say household income has stayed the same.
The survey is a representative sample that polled 1,001 respondents.