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Consumer Confidence in Housing Declines

The Fannie Mae Home Purchase Sentiment Index (HPSI) for December registered at 74.0, a 6.0-point decline from November and the second consecutive month of decreases. Year-over-year, the HPSI was down by 17.7 points.

The individual components of the HPSI were mostly negative in December. On a month-over-month measurement, the percentage of respondents who say it is a good time to buy a home decreased from 57% to 52%, while the percentage who say it is a bad time to buy increased from 35% to 39%. As a result, the net share of respondents who believed this is a good time to buy decreased 9 percentage points.

Furthermore, the percentage of respondents who said it was a good time to sell a home decreased from 59% to 50%, while the percentage who felt it was a bad time to sell increased from 33% to 42%. As a result, the net share of those who say it is a good time to sell decreased 18 percentage points.

In regard to pricing, the percentage of respondents who stated home prices will go up in the next 12 months remained the same at 41%, while the percentage who said home prices will go down increased from 13% to 16% and the share who predicted home prices will stay the same decreased from 35% to 34%. As a result, the net share of those who forecasted home prices will go up decreased 3 percentage points.

The percentage of respondents who were sure that mortgage rates will go down in the next 12 months remained the same at 8%, while the percentage who expected mortgage rates to go up also remained unchanged at 43% and those who thought mortgage rates will stay the same decreased slightly from 40% to 39%. As a result, the net share of those forecasting mortgage rates will go down over the next 12 months remained unchanged month-over-month.

As for the employment picture, the percentage of respondents who insisted they were not concerned about losing their job in the next 12 months decreased from 76% to 75% while the percentage who were concerned increased from 24% to 25%. As a result, the net share of those who were not concerned about losing their job decreased 2 percentage points month over month.

On the household income front, the percentage of respondents who said their household income was significantly higher than it was 12 months ago decreased from 24% to 20%, while those who felt their household income is significantly lower remained unchanged at 18% and the percentage whose household income is about the same increased from 57% to 61%. As a result, the net share of those who said their household income is significantly higher than it was 12 months ago decreased 4 percentage points.

“The HPSI declined for the second consecutive month and fell to its lowest level since May 2020, as consumers adjusted to the worsening COVID-19 conditions of the first few weeks of December–the survey collection period,” said Doug Duncan, Fannie Mae SVP and Chief Economist. “Both the ‘Good Time to Sell’ and ‘Good Time to Buy’ components fell significantly, with respondents overwhelmingly noting the unfavorability of economic conditions. In particular, the sell-side component fell for the first time since April and by 18 points, reversing most of the increases of the past three months and implying to us that, at least temporarily, potential home sellers might wait to list their homes. If so, this could have the effect of perpetuating already-tight inventory levels and supporting additional, albeit lesser, home price growth, which could contribute to a further moderating of home sales.”

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.
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