Housing Confidence Falls to Lowest in a Year, Buyers Say Not a Good Time to Buy
By Maggie Wilson @ Real Estate Daily
November 7, 2018

Housing sentiment fell to its lowest level in a year in October, according to a monthly survey by Fannie Mae (Home Purchase Sentiment Index® (HPSI). Consumer attitudes toward both buying and selling homes dropped, with the former falling the most of all the six survey components — a sizable five percentage points. That reading tied the survey’s second lowest in its history.

However, the net share who expect mortgage rates to go down over the next 12 months fell 4 percentage points and the net share of survey respondents who said their household income is significantly higher than it was 12 months ago decreased 3 percentage points. Respondents also expressed a slightly more pessimistic view on job security, with the net share confident about not losing their job falling by 1 percentage point. Finally, the net share of respondents who said that home prices will go up in the next 12 months increased 1 percentage point.

Key Takeaways

  • Consumer attitudes toward both buying and selling homes dropped, with the former falling the most of all the six survey components, a sizable five percentage points. It tied its second lowest reading in the survey's history.
  • Fewer consumers now expect home prices to rise, echoing other surveys that have shown a drop in the number of people who think owning a home is currently a good investment.
  • Fewer consumers believe mortgage rates will fall back to recent lows.
  • The net share of Americans who say it is a good time to buy a home rose 5 percentage points from last month to 26%.

The data is a sharp turnaround from last spring, when confidence in the U.S. housing market was soaring, mortgage rates were relatively low and the economy was flying high.

Fewer consumers now expect home prices to rise, echoing other surveys that have shown a drop in the number of people who think owning a home is currently a good investment. Home prices are still gaining, but those gains have been shrinking each month: They’ve fallen below six percent annually for the first time in a year, according to the much-watched S&P Case-Shiller home price index.

Housing sentiment has been falling for the past several months, despite the fact that more consumers think the economy is on the right track. That component of the survey reached a new high.

“The contrast between the survey’s findings of weak home buying sentiment and overall economic optimism mirrors what we’re seeing in the broader economy,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “While economic growth posted the fastest back-to-back pace in four years in the third quarter, residential investment declined for the third consecutive quarter, a first for the current expansion.”

Fewer people now believe mortgage rates will fall back to recent lows. In fact, rates have continued to rise over the last week, putting pressure on mortgage application volume.

Last week it fell to the lowest level in four years, as rates hit an eight-year high. Not only are potential buyers faced with weakening affordability, but there are still very few entry-level homes for sale. While supplies are finally rising for the first time in over a year, they are coming off near record lows, so there is still not a lot to choose from.

Adding insult to the supply injury, as mortgage rates rise, fewer homeowners may want to list their properties for sale.

“Who wants to give up a mortgage with a 3 handle on it?,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group, as he referenced interest rates at or near 3 percent.

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.

he 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.

View Original Article at Fannie Mae