Housing Sentiment Boosted by Perceived Sellers’ Market

News

In case you missed it, last month Fannie Mae began to
transition the multi-graph and narrative report detailing results of its
National Housing Survey (NHS) into a different format, the Home Purchase Sentiment
Index (HPSI).  The Index distills responses to six survey
questions about consumers’ home purchase sentiment into a single number which
the company says “reflects current and forward-looking housing market outcomes
and complements existing data sources to inform housing related analysis and
decision making.” 

The HPSI summarizes
consumers attitudes about whether it is a good or bad time to buy or to sell a
house, what direction they expect home prices and mortgage interest rates to
move, how concerned they are about losing their jobs, and whether their incomes
are higher than they were a year
earlier.             

 

 

The
HPSI increased from 80.8 in August, its first public release, to 83.8 in
September.  The change was driven by a
return in consumer confidence in the home buying and selling market after a
recent dip, suggesting continued gradual improvement in housing activity. Overall, the HPSI, which is based on
data back to the June 2010 inauguration of the NHS, is up 3.6 points since this
time last year.

Responses
that it is a good time to sell rose 5
percentage points to 52%, tying June’s survey high while those saying it was a bad
time decreased to 36%, setting a new survey low. Thus the Good Time to
Sell component increased 13 points on net in September.  Fannie Mae credited the gain to a strong home
price environment coupled with a slight improvement in consumers’ economic
outlooks.

High
rental costs
may be encouraging more renters to consider homeownership which
probably led to the 3 point on net increase to the Good Time to Buy component. Although
net home price and mortgage rate expectations dipped in September, consumers’
confidence in their employment and financial situations climbed 2 and 3 points,
respectively, further suggesting a possible firmer footing for housing.

“The HPSI returned near its record high
this month, driven primarily by improvement in attitudes about selling a home
and strengthening home prices,” Doug Duncan, senior vice president and chief
economist at Fannie Mae said. “With consumers’ expectations for rental price
increases continuing to outpace their expectations for home price growth, many
consumers may view homeownership as a more attractive option. This should
have positive implications for the housing market, which remains well below
historical norms in relation to housing starts. We noted last week that,
despite a relatively dismal jobs report, the addition of 8,000 construction
jobs, the biggest gain in four months, may be a sign of grudging progress for
the supply side of housing. The September HPSI data, combined with the recent
increase in construction jobs, are consistent with our expectation for a
continued upward grind in housing.”

Other highlights from the NHS:

  • The percent of respondents who said that home prices will
    go up over the next 12 months fell to 45%. The percent who said that home
    prices will go down remained constant at 9%.
  • The share who expect mortgage interest rates to go up
    in the next 12 months rose 1 percentage point to 55% while those who
    expect rates to go down remained the same at 5%.
  • The share of respondents who say they are not concerned
    with losing their job rose to 84%, while the share of respondents who say
    they are concerned with losing their job fell to 15%.
  • The share of respondents who say their household income
    is significantly higher than it was 12 months ago rose to 28%, while those
    who say it is significantly lower rose as well to 13%.   

The NHS is conducted monthly by telephone
among a panel of 1,003 consumers, both homeowners and renters.  They are asked over 100 questions to track
attitudinal shifts, six of which are used to construct the HPSI.

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