housing-sentiment-dampened-by-rising-rates-despite

January 09, 2017

Housing Sentiment Dampened by Rising Rates, Despite Improved Economic Confidence Post-Election

Matthew Classick

202-752-3662

WASHINGTON, DC – The Fannie Mae Home Purchase Sentiment Index^® (HPSI) decreased in December for the fifth consecutive month, dipping 0.5 points to 80.7. The six components that comprise the HPSI showed mixed results in December. The net shares of consumers expecting mortgage rates to go down over the next 12 months and those who believe their household income is significantly higher today compared to year-ago levels fell four and five percentage points, respectively. However, the net share of Americans who say it is a good time to buy a house rose by two percentage points, and the net share of consumers reporting confidence in not losing their job rose four percentage points. Both the net percentage of those who believe it is a good time to sell and the net share who believe that home prices will go up remained unchanged in December.

“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.”

HOME PURCHASE SENTIMENT INDEX – COMPONENT HIGHLIGHTS

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.

ABOUT FANNIE MAE’S HOME PURCHASE SENTIMENT INDEX

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. 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. The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that 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.

ABOUT FANNIE MAE’S NATIONAL HOUSING SURVEY

The most detailed consumer attitudinal survey of its kind, Fannie Mae’s National Housing Survey (NHS) polled 1,000 Americans via live telephone interview 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. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). As cell phones have become common and many households no longer have landline phones, the NHS contacts 60 percent of respondents via their cell phones (as of October 2014). For more information, please see the Technical Notes. Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future. The December 2016 National Housing Survey was conducted between December 1, 2016 and December 21, 2016. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by Penn Schoen Berland, in coordination with Fannie Mae.

DETAILED HPSI & NHS FINDINGS

For detailed findings from the December 2016 Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results.

To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/FannieMae.

housing-sentiment-dampened-by-rising-rates-despite