HPSI in Holding Pattern as Election Results Resolve and Pandemic Evolves

Consumers' Housing Confidence Inches Upward but Tempered by Income and Employment Concerns

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Nov 09, 2020, 08:30 ET

WASHINGTON, Nov. 9, 2020 /PRNewswire/ -- The Fannie Mae (OTCQB: FNMA) Home Purchase Sentiment Index^® (HPSI) ticked up 0.7 points in October to 81.7, rising for the third consecutive month. Three of the six HPSI components increased month over month, with consumers reporting a more optimistic view of both homebuying and home-selling conditions, in addition to expecting mortgage rate declines. However, consumers also reported greater pessimism regarding their personal finances and employment outlook. Year over year, the HPSI is down 7.1 points.

"In October, home purchase sentiment and personal finance sentiment diverged to produce only a slight increase in the HPSI," said Doug Duncan, Senior Vice President and Chief Economist. "Though there were improvements in the HPSI's buying, selling, and mortgage interest rate outlook components, we saw similar declines in the job security and household income change components. To date, the HPSI has recovered over 60 percent of its COVID-19 pandemic loss, reflecting the bright spot that the mortgage market has been in the economy. However, the continuing evolution of the pandemic and the 2020 election outcomes may have longer lasting and unexpected impacts on consumer sentiment, as we saw following the 2016 elections, and we expect both factors will shape the housing market over the coming months."

Home Purchase Sentiment Index – Component Highlights

Fannie Mae's Home Purchase Sentiment Index (HPSI) increased in October by 0.7 points to 81.7. The HPSI is down 7.1 points compared to the same time last year. Read the full research report for additional information.

Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home increased from 54% to 60%, while the percentage who say it is a bad time to buy decreased from 38% to 35%. As a result, the net share of Americans who say it is a good time to buy increased 9 percentage points month over month.
Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home increased from 56% to 59%, while the percentage who say it's a bad time to sell decreased from 38% to 35%. As a result, the net share of those who say it is a good time to sell increased 6 percentage points month over month.
Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased this month from 41% to 40%, while the percentage who say home prices will go down increased from 17% to 20%. The share who think home prices will stay the same decreased from 34% to 31%. As a result, the net share of Americans who say home prices will go up decreased 4 percentage points month over month.
Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months remained unchanged at 11%, while the percentage who expect mortgage rates to go up decreased from 38% to 32%. The share who think mortgage rates will stay the same increased from 44% to 49%. As a result, the net share of Americans who say mortgage rates will go down over the next 12 months increased 6 percentage points month over month.
Job Concerns: The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 83% to 79%, while the percentage who say they are concerned increased from 16% to 21%. As a result, the net share of Americans who say they are not concerned about losing their job decreased 9 percentage points month over month.
Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 24% to 23%, while the percentage who say their household income is significantly lower increased from 17% to 20%. The percentage who say their household income is about the same decreased from 59% to 55%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 4 percentage points month over month.

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 approximately 1,000 respondents 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 70 percent of respondents via their cell phones (as of January 2018). 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 support the housing market. The October 2020 National Housing Survey was conducted between October 1, 2020 and October 25, 2020. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by PSB, in coordination with Fannie Mae.

Detailed HPSI & NHS Findings
For detailed findings from the October 2020 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 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.

To receive e-mail updates with other housing market research from Fannie Mae's Economic & Strategic Research Group, please click here.

About Fannie Mae
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:

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https://www.fanniemae.com/news

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Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

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