Consumers Expect Strong Increases in Housing Costs

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After dropping in October from what had been an all-time high the previous
month, Fannie Mae’s Home Purchase Sentiment Index (HPSI) resumed its upward trek, increasing by 2.6 points in November to 87.8,
Strong responses to questions in the National Housing Survey (NHS) to questions
about whether it was a good time to buy a home and expectations for home prices
were the primary drivers of the index gains.

 

 

 

 

The survey is based on
six of more than a hundred questions asked in the monthly NHS survey.  Four of the six components gained ground in
November.

The net share of
respondents who said now is a good time to buy a home increased 7 percentage points
to 29, erasing the previous month’s 6-point drop. The net remains down 1
percentage point compared to the same period last year.  The net share who view it as a good time to
sell rose 4 points to 34 and is now 21 percentage points higher than last
November.  There was a greater sense of
job security in November, with the net share who say they are not concerned
about losing their job increasing 4 percentage points to 74 percent.

The net share who said
home prices will go up
in the next 12 months increased 6 percentage points in
November.  Although the questions are not
a component of the index, respondents were asked to quantify the expected home price
appreciation as well projected rental gains.  Both shot up significantly.  The anticipated increase in home prices over
the next year increased from 4.4 percent in October to 4.9 percent while
respondents revised their forecast for rent increases from 2.3 percent to 3.7
percent.

The two index components
that did not increase were the net share of consumers who reported that their
income is significantly highe
r than it was 12 months ago which was unchanged at
14 percent, and the net who expect mortgage rates to go down over the next 12
months which fell 5 points to a negative 51 percent.

“In November, the HPSI rebounded to near its all-time high, returning the
index to its gradual upward trend and suggesting fairly stable consumer
home-buying attitudes,” said Doug Duncan, senior vice president and chief
economist at Fannie Mae. “These results are consistent with our
expectation that the housing market will continue its modest expansion going
forward. Next month’s survey should offer the public a first look at the
influence that potential tax reform may have on consumers’ views toward housing
and the broader economy.”

The NHS, from which the Index is
constructed, is conducted monthly by telephone among 1,000 consumers, both
homeowners and renters.  Respondents are
asked more than 100 questions to track attitudinal shifts. 



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