Tax Cut Uncertainty Dampened Consumer Attitudes in December


Americans continued to have ambivalent views about the
current virtues of both home buying and home selling in December.  Consumers, responding to Fannie Mae’s monthly
National Housing Survey (NHS), expressed declining confidence in whether it is
a good time to buy, and no corresponding increase in whether it might be a good
time to sell.  

All in all, respondents appeared cautioned in their
attitudes toward both the economy and the housing market as 2017 neared an
end.  A decline in four of the six
components of Fannie Mae’s Home Purchase Sentiment Index (HPSI) brought it down
2.0 points to 85.8, reversing most of the 2.6-point increase in November. The HPSI is up 5.1 points compared
with its December 2016 counterpart. Fannie Mae attributed the decline, in part,
to uncertainty about the tax cut proposals that were under discussion in
Congress at that time the survey was conducted.



The percentage
of respondents who said now is a good time to buy a home decreased 5 percentage
points compared to November to a net of 24 percent, and is down 8 percentage
points compared to the same period last year. The net share who reported it is
a good time to sell shot up earlier in 2017 and is now 21 points higher than the
same time in 2016, but was unchanged in December from the November net of 34

The net
share of respondents who expect home prices to rise over the upcoming 12 months
declined from 46 percent to 44 percent, and among those expecting further
appreciation, the average expectation for an annual gain (not an index
component) declined from 3.7 percent to 3.3 percent.   

also expressed a weakened sense of job security.  Those who say they are not concerned about
losing their job decreased 6 percentage points, but was still the majority
sentiment at a net of 68 percent.  The
net share of consumers who said mortgage rates will go down over the next 12
months fell 1 percentage point in December, to a negative net of 52 percent. Finally,
the net share reporting that their income is significantly higher than it was
12 months ago rose 2 percentage points to 16 percent. 

“Consumers remained cautious in
their housing outlook at the end of 2017, as tax reform discussions continued.
In December, mirroring the other major consumer sentiment benchmarks, the HPSI
reflected this caution and declined slightly,” said Doug Duncan, senior vice
president and chief economist at Fannie Mae. “Entering 2018, housing
remains a persistent challenge, particularly in rental markets,
where consumer expectations for price increases over the next 12 months reached
a new survey high.”

The NHS, from which the HPSI 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.  The Home Purchase Sentiment Index (HPSI)
distills information about consumers’ home purchase sentiment from six of those
questions into a single number. The December 2017 National Housing Survey was
conducted between December 1, 2017 and December 18, 2017.

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