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onsumer sentiment towards the housing market reached a two-year high in September, but this optimism may be short-lived due to rising mortgage rates. The Fannie Mae Home Purchase Sentiment Index jumped 1.8 points to 73.9, driven by expectations that mortgage rates will decline over the next year. A record 42% of consumers now believe rates will fall, up from 24% in June. However, only 19% think it's a good time to buy, and many respondents expect home prices to rise.

    The outlook may change quickly if rate declines don't materialize. Mortgage rates plummeted after the Federal Reserve cut interest rates by 50 basis points at the end of September, but they surged on October 4 following a strong jobs report. The 30-year fixed-rate mortgage is now over 6.62%, up from 6.24% just a week ago.

    High prices continue to hinder sales, despite low rates. Mark Palim, chief economist at Fannie Mae, notes that even when rates were near 6%, they didn't translate into increased sales. The agency expects existing home sales to reach a 30-year low by the end of 2024. This suggests consumers are still wary of high prices and may be waiting for further rate declines before buying.

    The rise in mortgage rates may also prompt homeowners with locked-in low rates to delay selling their properties. Over 84% of outstanding mortgages have rates below 6%, with over 56% below 4%.