Consumer Optimism Continues Despite Rising Home Prices

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Despite declining consumer confidence about buying a
home, Fannie Mae’s Home
Purchase Sentiment Index® (HPSI) hit a second consecutive survey high in May. The
Index, which distills some of the responses from the National Housing Survey, rose
0.6 points to 92.3.   In May 2017 the
Index stood at 86.2.

 

 

However, the
company says consumer attitudes about buying and selling a home have continued
to diverge
as home prices have increased. While the net share of respondents
who reported that now is a good time to sell a home increased to 46 percent in
May, and is now up 14 percentage points year over year, the net share who said
now is a good time to buy a home decreased to 28 percent, showing little
improvement year over year.

Three of the
six elements of the HPSI increased from April and all were higher than a year
earlier.  In addition to the increase in
consumers who say it is a good time to sell a home, more Americans reported
they were confident about keeping their job, up 2 percentage points for the
month and 7 points year-over-year, and that their household income had
increased, a gain of 3 points on both a monthly and an annual basis.

The net
share of consumers who said home prices will go up in the next 12 months
remained unchanged at 49 percent, while the net share who expect mortgage rates
to go down over the next 12 months fell 1 percentage point to a net negative of
49 percent.

While not among
the responses that are included in the Index, the National Housing Survey®
results also showed that the share of consumers who expect their personal
financial situation to improve
within the next year fell 6 percentage points to
48 percent, and those who expect it to stay the same rose 6 percentage points
to 40 percent.

“The HPSI edged up to another survey
high in May, bolstered in part by a fresh record high in the net share of
consumers who say it’s a good time to sell a home. However, the perception of
high home prices that underlies this optimism cuts both ways, boosting not only
the good-time-to-sell sentiment but also the view that it’s a bad time to buy,
and presenting a potential dilemma for repeat buyers,” said Doug Duncan, senior
vice president and chief economist at Fannie Mae. “For the survey’s renter
respondents, who are unable to reap benefits from selling a home, the HPSI has
been essentially flat in the first quarter, during which home sales were also
lackluster. According to our latest Mortgage Lender Sentiment Survey®, which we
expect to release on Tuesday, lenders expect mortgage demand to soften in the
near term
.”

The Home Purchase Sentiment Index
(HPSI) converts information about consumers’ home purchase sentiment from six
NHS questions 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 NHS 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 May survey was conducted between May 1 and May 22, 2018.



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