Respondents wary of market in latest Fannie Mae housing sentiment survey

Just one month after Fannie Mae's monthly survey on attitudes toward the housing market and economy recorded high levels of optimism, respondents were considerably less likely to believe it was a good time to buy or sell a home. Respondents were more confident about their job security, but less likely to express confidence in their own finances or the overall economy.

Fannie Mae's Home Purchase Sentiment Index fell to 86.8, dropping 1.5 points from a score that tied an all-time high in June. This index is based on responses to the National Housing Survey on whether respondents believe it is a good time to buy or sell a home, expected changes to home prices and mortgage rates, perceived job security, and changes to household income.

Fifty-seven percent of respondents said they considered it a good time to buy a home, a survey low. This share was down from 62 percent in June and 63 percent in July 2017. The share of respondents who thought it was a bad time to buy a home reached a survey high of 34 percent, up 2 percentage points from the previous month and 4 percentage points from the previous year.

Respondents have been more likely to consider it a good seller's market, with the net share of people considering it a good time to sell reaching a survey high in June. However, the share of respondents considering it a good time to buy a home fell from 64 percent in June to 58 percent in July; this was still up 2 percentage points from July 2016. Thirty percent thought it was a bad time to sell, up 5 percentage points from June but down 6 percentage points from July 2016.

Fannie Mae noted that high home prices are the main reason people do not consider the market to be buyer friendly. Nearly half of those who considered it a bad time to buy cited home prices. Respondents who considered it a bad time to sell were increasingly likely to cite economic conditions.

"It's clear that high home prices are a growing challenge helping to send buying sentiment to a record low," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "However, we find the notable decline in selling sentiment surprising. If it persists, this month's decrease in optimism regarding the direction of the economy, which appears to coincide with the rising uncertainty regarding the outlook for pro-growth legislation this year, could weigh on overall housing sentiment in the second half of the year."

Housing

Expectations for housing prices held fairly steady in July, with 53 percent believing that home prices will increase in the next 12 months. This was up 1 percentage point from the previous month and 4 percentage points from the previous year. Only 6 percent believe prices will decrease, down 2 percentage points from both the previous month and previous year.

On average, respondents believe home prices will grow by 3.7 percent over the next 12 months. This was up from 3.4 percent in June and 2.1 percent in July 2016.

Fifty-five percent said they think mortgage rates will go up in the next year, down 2 percentage points from the previous month but up 11 percentage points from the previous year. Six percent expect mortgage rates to go down, a decrease of 2 percentage points from the previous month and 1 percentage point from the previous year.

Fifty-three percent said they think it would be easy to get a mortgage, down 6 percentage points from June but up 1 percentage point from July 2016. The share expecting that it would be difficult to get a mortgage rose 5 percentage points from the previous month to 42 percent, but this was still a year-over-year decrease of 3 percentage points.

Respondents were slightly more likely to look upon renting favorably, with 30 percent saying they would rent their next home if they were to move. This was up 2 percentage points from the previous month and 4 percentage points from the previous year. Sixty-five percent said they would buy a home if they moved, down 2 percentage points from both June and July 2016.

However, respondents continued to expect that rents would climb faster than home prices. The average respondent expected rents to increase by 4.9 percent over the next 12 months, up from 4.8 percent in the previous month and 4 percent in the previous year.

Economy

After decreasing in recent months, a higher share of respondents expressed confidence in their job security. Eighty-seven percent said they were not concerned about losing their job in the next 12 months, up 4 percentage points from the previous month and 2 percentage points from the previous year. Twelve percent said they were worried about a job loss, down from 17 percent in June and 16 percent in July 2016.

Twenty-seven percent said their household income is significantly higher than it was 12 months ago, down 1 percentage point from the previous month but up 5 percentage points from the previous year. The share of respondents reporting that their income is significantly lower held at 11 percent.

Forty-six percent said they expect their financial situation to improve in the next 12 months, down from 49 percent in June but up from 44 percent in July 2016. Thirteen percent said they believe their financial situation will worsen, the same as in July 2016 and up from 12 percent in June.

Forty-six percent said they consider the economy to be on the right track, down 4 percentage points from June but up 13 percentage points from July 2016. Thirty-nine percent said they consider the economy to be on the wrong track, up 3 percentage points from the previous month but down 20 percentage points from the previous year.

Fannie Mae's National Housing Survey has been issued each month since June 2010. Respondents are interviewed via phone and asked more than 100 questions to gauge attitudes on the housing market and economy in the United States.

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