Consumer Pessimism On Display as Home Purchase Sentiment Index Drops Again

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Nov 07, 2016, 08:30 ET

WASHINGTON, Nov. 7, 2016 /PRNewswire/ -- The Fannie Mae Home Purchase Sentiment Index^® (HPSI) dipped 1.1 points to 81.7 in October, the third decrease in as many months. Four of the six components that comprise the HPSI fell during the month. The share of consumers reporting significantly higher income over the past year experienced the largest drop, decreasing eight percentage points on net. The net share of consumers expecting home prices to go up in the next year fell three percentage points, and those who expect mortgage rates to drop and those who are confident about not losing their job each dropped by one percentage point in October. However, more consumers said they believe now is a good time to buy and a good time to sell a home – increasing two and four points on net, respectively.

"The HPSI fell in October for the third straight month from its record high in July, reaching the lowest level since March. Recent erosion in sentiment likely reflects, in part, enhanced uncertainty facing consumers today," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Since July, more consumers, on net, have steadily expected mortgage rates to rise and home price appreciation to moderate. Furthermore, consumers' perception of their income over the past year deteriorated sharply in October to the worst showing since early 2013, weighing on the index. However, this component of the HPSI is volatile from month to month, and the firming trend in wage gains from the October jobs report, if sustained, may foreshadow an improving view in the near future."

HOME PURCHASE SENTIMENT INDEX – COMPONENT HIGHLIGHTS

Fannie Mae's 2016 Home Purchase Sentiment Index (HPSI) decreased again in October by 1.1 percentage points to 81.7. Overall, the HPSI is down 1.5 points since this time last year.

Partially reversing the decrease from last month, the net share of Americans who say it is a good time to buy a house rose by 2 percentage points to 31%. The share who think it is a good time to buy remained at an all-time survey low.

The net percentage of those who say it is a good time to sell rose 4 percentage points to 19% in October, 1 percentage point away from the all-time survey high seen in July. The share who think it is a bad time to sell tied an all time survey low last reached in July.

The net share of Americans who say that home prices will go up continued to fall in October, falling 3 percentage points from last month to 31%.

The net share of those who say mortgage rates will go down over the next 12 months fell 1 percentage point to -45%.

The net share of Americans who say they are not concerned with losing their job fell 1 percentage point to 69%.

The net share of Americans who say their household income is significantly higher than it was 12 months ago fell 8 percentage points to 4%, the lowest it has been in more than three years.

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 October 2016 National Housing Survey was conducted between October 1, 2016 and October 25, 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 October 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 Consumer Attitude Measures page on fanniemae.com. Also available on the site are in-depth topic analyses, 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.

SOURCE Fannie Mae