Housing Confidence Dips Amid Robust Home Price Gains and Rising Rate Expectation

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The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased 3.8 percentage points in March to 84.5, following February’s survey high. Five of the six components that comprise the HPSI were down. The net share of Americans who reported that now is a good time to buy fell 10 percentage points, while the net share reporting that now is a good time to sell increased 9 percentage points. Consumers also expressed reduced confidence about the stability of their jobs, with the net share of that component falling 8 percentage points. Additionally, on net, the share of respondents reporting that household income is significantly higher than it was 12 months ago decreased 8 percentage points. The net share of Americans who say that mortgage rates will go down over the next twelve months fell 5 percentage points to a new survey low. Finally, the net share of those who think home prices will go up decreased by 1 percentage point this month.

“Home purchase sentiment gave back some of the gains accumulated over the prior two months that sent the index to its survey high in February. Strong home price appreciation has turned into a double-edged sword for the housing market as it boosted the net share of consumers saying it’s a good time to sell to a record high, surpassing the plunging good time to buy indicator for the first time in the history of the survey,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “In addition, the net share of consumers who expect mortgage rates to rise over the next year exceeded that experienced during the 2013 taper tantrum. However, the housing market could get some tailwinds from a seasonal rise in for-sale inventory, particularly as some sellers seek to lock in profits from recent rapid home price gains. The market could also get a boost from homebuyers who decide to jump into the market before rates rise further.”

HOME PURCHASE SENTIMENT INDEX – COMPONENT HIGHLIGHTS

Fannie Mae’s 2017 Home Purchase Sentiment Index (HPSI) decreased in March by 3.8 percentage points to 84.5. The HPSI is up 4.3 percentage points compared with the same time last year.

•The net share of Americans who say it is a good time to buy a house fell 10 percentage points to 30%, losing much of the increased optimism seen in February.
•The net percentage of those who say it is a good time to sell increased by 9 percentage points to 31%, reaching a new survey high for the second consecutive month.
•High home prices were the most important reason for both the bad time to buy and good time to sell indicators, cited by 39% of consumers who say it is a bad time to buy (a survey high) and 24% of those who say it is a good time to sell.
•The net share of Americans who say that home prices will go up decreased by 1 percentage point in March to 44%.
•The net share of those who say mortgage rates will go down over the next twelve months fell 5 percentage points to a survey low of -60%.
•The net share of Americans who say they are not concerned about losing their job fell 8 percentage points to 70%, as consumers express more measured expectations than in February.
•The net share of Americans who say their household income is significantly higher than it was 12 months ago fell 8 percentage points to 11% in March, declining from last month’s survey high.

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