Expectation for Rates to Rise Spikes in Fannie Mae Survey

Responses to ""Fannie Mae's"":http://www.fanniemae.com/portal/index.html latest National Housing Survey indicate potential homebuyers may enter the purchase market sooner rather than later.

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According to the GSE's findings, 57 percent of respondents expect prices will continue to rise in the next 12 months--a survey high. The share of those expecting prices will fall stayed flat at 7 percent.

The average price change expectation was 3.8 percent, a slight drop from May's high of 3.9 percent.

More notable was the pickup in mortgage rate expectations. The number of consumers expecting rates will rise over the next 12 months spiked 11 percentage points to 57 percent, another survey high. Only 4 percent said they expect rates will drop.

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Meanwhile, sentiment toward both buying and selling fell back slightly, with 72 percent of respondents saying now is a good time to buy and 36 percent saying it's a good time to sell.

""The spike in mortgage rate expectations this month seems to have had an impact on a number of the survey's indicators and may increase housing activity in the near term by driving urgency to buy,"" said Doug Duncan, SVP and chief economist at Fannie Mae. ""Consumers may recognize that today's still favorable mortgage rates and homeownership affordability levels will recede over time. Given rising home and rental price expectations and improving personal financial attitudes, more prospective homebuyers may be deciding that now is the time to get off the fence.""

Americans' outlook on the economy deteriorated slightly, though many were more optimistic about their personal situation. The share of respondents who said the economy is ""on the right track"" fell 2 percentage points from May to 38 percent, while the share who said the economy is ""on the wrong track"" increased the same amount to 55 percent.

On the other hand, the share of people who expect their own personal financial situation to improve over the next year jumped to 46 percent, its highest level in three years. Sixteen percent said they expect their situation to worsen, unchanged for the third consecutive month.