Consumer’s optimism towards the economy decreased yet again as they faced more uncertainty in October, according to the latest Fannie Mae Home Purchase Sentiment Index.
The index decreased 1.1 points from last month to 81.7 in October, marking the third consecutive decrease. This is a decrease of 1.5 points from last year.
The index reflects consumers’ current views and forward-looking expectations of housing market conditions.
Other measures of the consumer’s confidence in the economy are also decreasing.
The Index of Consumer Sentiment dropped to 87.2 in October, the same low recorded last September and the lowest level since October 2014, according to the Survey of Consumers conducted by the University of Michigan.
While all signs show that consumers are growing more unsettled about the state of the economy, experts from the Survey of Consumers are still not sure if this is simply a temporary drop due to the uncertainty surrounding the election.
“The HPSI fell in October for the third straight month from its record high in July, reaching the lowest level since March,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “Recent erosion in sentiment likely reflects, in part, enhanced uncertainty facing consumers today.”
The largest drop came in consumers who reported a significantly higher income over the past year. These consumers decreased by eight percentage points to 8% in October to its lowest point in three years.
“Since July, more consumers, on net, have steadily expected mortgage rates to rise and home price appreciation to moderate,” Duncan said.
Those who expect home prices to continue to rise fell by three percentage points to 31% and those who say mortgage rates will drop decreased by one percentage point to 45%. Likewise, those who are confident about keeping their job also fell by one percentage point to 69%.
On the other hand, more consumers said now is a good time to buy and sell a home, which increased by two and four percentage points to 31% and 19% respectively.
“Furthermore, consumers’ perception of their income over the past year deteriorated sharply in October to the worst showing since early 2013, weighing on the index,” Duncan said.
“However, this component of the HPSI is volatile from month to month, and the firming trend in wage gains from the October jobs report, if sustained, may foreshadow an improving view in the near future,” he said.