Housing sentiment trends upward as mortgage rates cool

Yahoo Finance Live compares current U.S. housing sentiments alongside easements seen in mortgage rate trends.

Video Transcript

DAVE BRIGGS: Let's get you up to speed now on some housing data. Upbeat news like inventories and very short supply, but the housing sentiment did tick up from November to December. That's according to Fannie Mae. 21% of respondents say now is a good time to buy a home. While still pretty low historically, that's up 5% from the prior month.

More consumers also now believe prices will fall over the next year. And more also believe mortgage rates will continue to fall with it. The average 30-year fixed most recently at 6.48%. That is down from north of 7%, still more than double this time last year. I don't know if you've seen the movie, "What About Bob?" It's all about baby steps in that movie. And that's really what this is. It's not great news, the 21%. Feel good, but it's a step in the right direction.

SEANA SMITH: I know. We got to take what we can get in this market in this economic environment. That has clearly been the message that what we have seen from investors, and certainly, it's an approach that we are starting to take over the last several weeks, searching for any sort of optimism.

So, yes, an improvement there when it comes to sentiment about how people are feeling about the real estate market, but they're certainly, I think it's fair to say, likely going to be some pain ahead. We've gotten a number of predictions from the biggest banks warning that the next couple of months, especially the first half of 2023, are going to be tough, a number I don't really see it significantly improving until potentially the end of the year, looking into 2024. So the next couple of months are certainly going to be pretty rocky, I'd say.

DAVE BRIGGS: Yeah, it really depends on how you see that news because as we just mentioned, more people believe prices will come down. And I think from what I'm understanding, probably low single digits in the first half of 2023, but will mortgage rates fall fast enough far enough to get people off the sidelines? I don't think a low single-digit drop in home prices are enough to unfreeze this market, unless you see mortgage rates get down below 6, into that mid 5's. And we're nowhere near that happening with still probably 50 to 75 basis point hike from the Fed on the way, so.

SEANA SMITH: Yeah, and the Fed once again--

DAVE BRIGGS: Don't hold your breath.

SEANA SMITH: --being very, very hawkish, not backing down, saying that they're not going to be changing or pivoting any time soon. So we'll see.