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Consumer housing sentiment continues to cool, despite post-election economic confidence

January 16, 2017 | By

The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased in December 2016 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’s 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.

Read more: Fannie Mae Index Reveals Consumers’ Homebuying Sentiment, Helps Forecast Housing Markets

Rates on the Rise

“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,” says 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,” he adds.

Read more: New Monthly Index Is All About Housing

Report Highlights

  • The net share of Americans who say it is a good time to buy a house rose by two percentage points to 32 percent.
  • The net percentage of those who say it is a good time to sell was unchanged from the prior month at 13 percent. The share who think it is a bad time to sell was also unchanged at 38 percent.
  • The net share of Americans who say that home prices will go up remained constant in December at 35 percent.
  • The net share of those who say mortgage rates will go down over the next 12 months fell four percentage points to -55 percent.
  • The net share of Americans who say they are not concerned about losing their job rose four percentage points to 68 percent.
  • The net share of Americans who say their household income is significantly higher than it was 12 months ago fell five percentage points to 10 percent in December, reversing some of the increase seen in November.

For detailed findings from the December 2016 Home Purchase Sentiment Index and National Housing Survey (NHS), 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.

Estimates, forecasts, and other views expressed in this article should not be construed as indicating Fannie Mae’s expected results, are based on a number of assumptions, and may change without notice. How this information affects Fannie Mae will depend on many factors. Neither Fannie Mae nor its Economic & Strategic Research (ESR) Group guarantees that the information in this article is accurate, current, or suitable for any particular purpose. Changes in the assumptions or underlying information could produce materially different results. The ESR Group’s views expressed in this article speak only as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

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