Housing Sentiment Lowered Among Consumer Economic Concerns

Consumer attitudes toward the real estate market slid down in August due to economic concerns, Fannie Mae reported in their newly launched Home Purchase Sentiment Index (HPSI).

In August 2015, the HPSI fell 0.5 points from July to 80.8, Fannie Mae said. The sentiment level is also down from the peak reached in June 2015 of 84.7 and the index is up 5.3 points from August 2014.

“Consumer attitudes toward the current home selling climate have slid back to their April 2015 level, contributing to a slight decline in the August HPSI reading relative to its four-year high, reached two months ago,” said Doug Duncan, SVP and chief economist at Fannie Mae. “Expectations of rising mortgage rates and increasing concerns in the last six months about the direction of the economy seem to be weighing on consumers’ assessment of the housing market."

"Expectations of rising mortgage rates and increasing concerns in the last six months about the direction of the economy seem to be weighing on consumers’ assessment of the housing market."

The HPSI is constructed from answers to six key NHS questions, Fannie Mae says. These questions ask consumers whether they think it is a good or bad time to buy or to sell a house, the 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.

“The Fannie Mae Home Purchase Sentiment Index provides the market a single number to track consumer attitudes focused on the housing market,” Duncan said. “Utilizing our National Housing Survey, the only consumer sentiment survey of its kind focused on housing, the HPSI will offer insights regarding current and future-looking housing market outcomes and will complement existing data sources to inform housing-related analysis.”

The index found that 63 percent of respondents indicated that now is a good time to buy a home, up 2 percentage points from last month, while 47 percent said that now is good time to sell a home and 44 percent say it's a bad time.

In addition, 47 percent of survey participants noted that home prices will go up over the next year, and 9 percent said that prices will go down.

Fannie Mae's data showed that 54 percent of respondents expect mortgage interest rates will increase over the next year, up 3 percent from July. The share who say mortgage rates will go down remained the same from July at 5 percent.

In terms of job stability, 83 percent of those surveyed said that they are not concerned with losing their job, while 16 percent expressed their concerns of losing their job.

Only 24 percent of respondents said that their household income was significantly higher than it was last year, while 12 percent stated that their income was significantly lower than it was last year.

"Those who think it’s a good time to buy or sell a home have consistently pointed to favorable mortgage rates as the primary reason for their optimism," Duncan explained. "Those who think it’s a bad time to buy or sell a home have consistently pointed to unfavorable economic conditions as the primary reason for their pessimism. Still, the four-year upward trend in the HPSI indicates that consumers remain fairly optimistic about the housing market.”

Click here to view Fannie Mae's Home Purchase Sentiment Index.