Many savvy real estate readers will recognize Fannie Mae,and its competitive counterpart Freddie Mac, as government owned companies that keep money moving through the housing market. That’s certainly true as Fannie Mae works to provide 30 year fixed mortgages and affordable rentals to those who might otherwise not qualify.
But Fannie Mae also provides important real estate market research through its in depth surveys. They track the results of their nationwide survey and use it to form The Fannie Mae Home Purchase Sentiment Index® (HPSI). The HPSI distills down consumer sentiment in the housing market to one useful number.
In their own words: “The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making.”
So let’s get to the good stuff. What are the latest results of the HPSI? Unfortunately the results are mixed at best. The HPSI was down for the fifth month in a row in December, dropping 0.5 points to 80.7.The six main tenants of the HPSI all showed mixed results.
Most consumers are now expecting mortgage rates to rise rather than fall over the next year. Also down were the number of responders who thought their household income was “significantly higher today” compared to the twelve months prior. These levels were down four and five percentage points, respectively.
Conversely, the net number of survey respondents who thought it was a good time to buy a home was up two percentage points. Also up was the net share of respondents who were confident they wouldn’t be losing their job, which was up four percent.
Those who thought it was a good time to sell and that home prices would go up, both remained flat in the December survey and corresponding index.
“Despite the post-election bump in general consumer attitudes, a rapid rise in mortgage rate expectations has tamped down home purchase sentiment, at least in the near term. A spike in economic optimism in the immediate aftermath of an election is typical. Whether consumers will sustain this level of optimism into 2017 remains unclear,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.
“The spike in interest rates reflects, in part, the market’s anticipation of pro-growth policies from the incoming Administration. If this optimism comes to fruition, it should translate into stronger income growth and increased job security for consumers – the two HPSI components that could help support housing sentiment this year,” Duncan added.
Here are some of the highlights from the most recent HPSI:
Overall, Fannie Mae’s 2016 Home Purchase Sentiment Index (HPSI) decreased again in December by 0.5 percentage points to 80.7. The HPSI is down 2.5 percentage points compared with the same time last year.
- The net share of Americans who say it is a good time to buy a house rose by 2 percentage points to 32%.
- The net percentage of those who say it is a good time to sell was unchanged from the prior month at 13%. The share who think it is a bad time to sell was also unchanged at 38%.
- The net share of Americans who say that home prices will go up remained constant in December at 35%.
- The net share of those who say mortgage rates will go down over the next twelve months fell 4 percentage points to -55%.
- The net share of Americans who say they are not concerned about losing their job rose 4 percentage points to 68%.
- The net share of Americans who say their household income is significantly higher than it was 12 months ago fell 5 percentage points to 10% in December, reversing some of the increase seen in November.
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