Income Concerns Hurting Housing Sentiment -Fannie Mae

News

Fannie
Mae’s Home Purchase Sentiment Index® (HPSI) suffered its
third decline in as many months in October. 
The Index, based on responses to six key questions in the company’s
monthly National Housing Survey, dipped 1.1 points from September to 81.7.  Decreases were posted for four of the six
components.  Overall, the HPSI is down
1.5 points since this time last year.  

 

 

The share of
consumers reporting significantly higher income over the past year experienced
the largest drop, decreasing eight percentage points on net.  The share of consumers who reported having a higher
income fell from 25 percent in September to 20 percent while those reporting
lower income climbed 3 points to 16 percent. 
The net figure for this component peaked at 18 percent in May and is now
at 4 percent.

 

 

Fewer
consumers expect continuing price rises over the next year and there was a
slight gain in those awaiting a decline resulting in a 3-point decrease in the
net share still predicting appreciating values. Those who expect mortgage rates
to drop and those who are confident about not losing their job each dropped by
one percentage point in October.

The measures of those consumers
thinking it is either a good time to buy a home or a good time to sell one each
increased.  Partially reversing the
decrease from last month, the net share of Americans who say it is a good time
to buy a house rose by 2 percentage points to 31 percent. The share who think
it is a good time to buy remained at an all-time survey low of 30 percent.

 

 

The net percentage of those who say
it is a good time to sell rose 4 percentage points to 19 percent, 1 percentage
point away from the all-time survey high seen in July. The share who think it
is a bad time to sell tied an all-time survey low of 36 percent last reached in
July.

 

 

Doug Duncan, Fannie Mae’s senior
vice president and chief economist said, “The HPSI fell in October for the
third straight month from its record high in July, reaching the lowest level
since March
. Recent erosion in sentiment likely reflects, in part, enhanced
uncertainty facing consumers today.  Since
July, more consumers, on net, have steadily expected mortgage rates to rise and
home price appreciation to moderate. 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. 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.”

The Home Purchase Sentiment Index
(HPSI) distills information about consumers’ home purchase sentiment from
Fannie Mae’s National Housing Survey® (NHS) into a single number. NHS is
conducted monthly by phone among a panel of about 1,000 consumers, both
homeowners and renters.  They are asked
about 100 questions to assess their attitudes toward owning and renting a home,
home and rental price changes, homeownership distress, the economy, household
finances, and overall consumer confidence.

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