Fannie Mae’s Chief Economist pointed to
the turmoil over the fiscal cliff and debt ceiling for a sharp drop in consumer
confidence in December. Fannie Mae’s
National Housing Survey recorded a 5 point month-over-month decline in the
percentage of respondents who think the nation’s economy is “on the right track”
to 44 percent while “wrong track” responses rose from 50 to 53 percent.
At the same time confidence in the
housing sector grew with consumers showing continued positive attitudes toward
home prices, rents, and mortgage rates.
The percentage of respondents who expect home prices to increase over
the next 12 months rose from 37 to 43 percent, the highest share in the survey’s
2.5 year history. The percentage
expecting price decreases fell from 44 percent in November to 40 percent in
December. Expectations for price
increases averaged 2.6 percent compared to 1.7 percent in November, another
historic high for the survey.
Twenty-one percent of respondents
say it is a good time to sell, a 2 percentage point decrease from last month’s
record high, but a 10 percentage point increase year over year. Seventy-one percent view it as a good time to
buy, down one point from November and the share of respondents who said they
would buy if they were going to move decreased slightly to 66 percent.
Doug Duncan, senior vice president
and chief economist of Fannie Mae said, “This view is consistent with Fannie
Mae’s expectation that home prices will rise going forward on a national basis.
Combined with consumers’ growing mortgage rate and rental price increase
expectations, the positive home price outlook could incentivize those waiting
on the sidelines of the housing market to buy a home sooner rather than later
and thus support continued housing acceleration. Despite continued strengthening in the
housing market, consumers’ concerns over the fiscal cliff and debt ceiling have
caused considerable volatility in their perceptions of the larger economy. This
uncertainty seems to be prompting a growing share of consumers to expect their
personal finances to worsen and may contribute to weaker near-term economic
percentage who think mortgage rates will go up continued to rise, increasing by
2 percentage points to 43 percent, the highest level since August 2011.
Almost half (49 percent) of
respondents expect rental prices to increase over the next 12 months with the
average increase expected to be 4.4 percent compared to 42 percent in
November. The percentage who thinks
mortgage rates will go up continued to rise, increasing by 2 percentage points
to 43 percent, the highest level since August 2011.
The percentage of consumers who
expect their personal financial situation to get worse over the next 12 months
continued to rise, reaching 20 percent and the highest level since August 2011.
Twenty-two percent of respondents say
their household income is significantly higher than it was 12 months ago, a
slight increase over last month and a 5 percentage point increase over
September while 37 percent reported significantly higher household expenses in
the last year, a 3 percentage point increase over the past month and the
highest level since December 2011.
The Fannie Mae National Housing
Survey polls 1,000 respondents by phone each month to assess their attitudes
toward homeownership, mortgage rates, household finances, the economy, and
homeownership distress. Respondents
include renters, mortgaged homeowners, and those who own unencumbered homes.