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Consumer Confidence Up, Homebuying Confidence Down

house-graphupWhile consumer confidence rose in December to its highest point since 2001, confidence in homebuying dipped for the fifth consecutive month.

Fannie Mae [1]’s latest Home Purchase Sentiment Index was only down a half-percent from December, to 80.7. According to the index, the number of consumers expecting mortgage rates to go down over the next 12 months dropped 4 percent compared to a year ago. Fannie Mae stated that the continued downward arc could be a reaction to rising interest rates.

“Despite the post-election bump in general consumer attitudes, a rapid rise in mortgage rate expectations has tamped down home purchase sentiment, at least in the near term,” said Doug Duncan, SVP and Chief Economist at Fannie Mae. “A spike in economic optimism in the immediate aftermath of an election is typical. Whether consumers will sustain this level of optimism into 2017 remains unclear.”

Duncan said that the spike in interest rates reflects, in part, the market’s anticipation of pro-growth policies from the incoming administration.

“If this optimism comes to fruition,” he said, it should translate into stronger income growth and increased job security for consumers—the two HPSI components that could help support housing sentiment this year.”

The percentage of Americans who said now is a good time to buy a house rose by two percentage points, to 32. An additional percent in December felt the economy was in better shape compared to those surveyed a year ago, while the net share of consumers reporting confidence in not losing their job rose four percentage points. Both the net percentage of those who believe it is a good time to sell and the net share who believe that home prices will go up remained unchanged in December.

According to the National Association of Homebuilders, consumer confidence increased [2] in December to the highest level since August 2001. And while assessments of current conditions dropped, consumers held more positive views of the near future.

The Conference Board's Consumer Confidence Index hit 113.7 in December, higher than an upwardly revised 109.4 in November. The present situation index declined from 132.0 to 126.1 and the expectations index rose from 94.4 to 105.5. The index itself has been almost entirely on the upswing since 2009.

Jing Fu, Senior Economist at NAHB, said that expectations of employment over the next six months were mixed. The share of respondents expecting more jobs in the coming six months increased from 5 percent, to 21, but “the net 5.4 percentage point decline in the share of respondents expecting job availability to be the same was partially offset by a net 0.5 percentage point increase in the share of respondents expecting fewer jobs.”