as higher mortgage rates slow the housing market consumers—and analysts—are updating their expectations housing market sentiment last month was at its lowest level since 2011 according to fannie mae ’s september home purchase sentiment index the survey’s responses—released last week—paint a bleak picture of consumer housing expectations three fourths of respondents said it was a bad time to buy a home and the share of respondents who said home prices would go down over the next year was greater than the share that said prices would go up for the first time since the early months of the pandemic in 2020 “as long as supply is limited and affordability pressures continue to constrain potential homebuyers via elevated home prices and mortgage rates we expect home sales will remain sluggish” doug duncan fannie mae’s chief economist said in a statement consumers aren’t the only ones updating their expectations a team of citi research analysts led by anthony pettinari lowered their thirdquarter pershare earnings estimates for home builders by a median 8 and dropped their 2023 estimates by a median 3 the revisions come with higher forecasts for mortgage rates and anticipated home price drops the citi analysts see rates in 2023 in a range from 65 to 675 and a peaktotrough drop in average sale price of 12 but that doesn’t mean home builder stocks which are largely down roughly 30 this year will necessarily suffer “we see significant negativity already priced into the stocks and 3q results could follow a recent trend of positive reactions despite belowcons earnings results and deteriorating macro” the analysts wrote citing dr horton ’s upcoming earnings release scheduled for nov 9 as a potential catalyst the citi analysts said they are “selectively positive” on builders with buy ratings on dr horton ticker dhi and pultegroup phm the team raised their price targets on several housing stocks for the next 12 months revising dr horton ’s target to 87 from 83 pultegroup ’s to 51 from 49 and toll brothers ‘ tol to 47 from 46 the analysts rate toll brothers shares neutral as of midday on tuesday dr horton was up 17 to 7342 pultegroup was up 13 to 4039 and toll was up 072 to 4464 analysts at wedbush also revised price targets on several builders this week analysts jay mccanless and brian violino lowered their price targets for three builders—dr horton meritage homes mth century communities ccs—as they anticipate the impact of higher mortgage rates on the companies’ earnings “the combination of mortgage rate buydowns and weaker demand are likely to lead to lower earnings over the next four quarters” the analysts wrote about dr horton the largest of the builders the analysts lowered their dr horton price target to 83 from 97 meritage’s target to 102 from 130 and century’s target to 79 from 94 while the analysts lowered their price targets they restated their outperform ratings on meritage dr horton and century communities  adding that the companies’ similar home building strategies—starting construction on a home without a contract in place—will act as an advantage in the nearterm over builders who begin construction after a contract is signed the analysts also lowered their price target for lgi homes lgih to 84 from 94 after the builder’s thirdquarter sales absorption pace announced last week with the company’s earnings release date came in below wedbush’s forecast the analysts rate lgi homes shares as neutral as of tuesday midday lgi meritage and century shares were each trading higher despite lower earnings expectations the analysts foresee a “positive demand inflection” in the first half of next year “assuming the current demand pause is similar to the pattern of events in 2018 and 2019” builders are not the only companies contending with lower demand amid higher mortgage rates r5 analyst scott mushkin downgraded shares of home improvement company lowe’s low to a hold from a buy earlier this week barron’s reported as the housing market slows all eyes are on 30year fixed mortgage rates which at an average 666 as of last week has more than doubled this year as the federal reserve has acted to combat inflation it’s likely that mortgage rates will react to economic indicators through the rest of the year barron’s reported previously while the next freddie mac reading on the average 30year fixed rate is due on thursday mortgage rates likely rose in the wake of friday’s jobs report rocket mortgage on tuesday morning quoted an interest rate of 699 on a fixed 30year purchase loan