Housing sentiment falls slightly in monthly Fannie Mae survey

More Americans expected favorable mortgage rates in the near future, according to the most recent monthly housing survey by Fannie Mae. However, the organization also noted that this trend, along with an increased inventory of properties for sale helping to slow home price appreciation, has likely eased urgency among potential buyers.

Fannie Mae's Home Purchase Sentiment Index for June stood at 91.5, down 0.5 points from May but a year-over-year improvement of 0.8 points. The index is based on six factors from Fannie Mae's National Housing Survey, including perceptions on whether it's a good time to buy or sell a home, expected changes to home prices and mortgage rates, perceived job security, and improvements in household income.

The share of respondents expecting mortgage rates to increase in the next 12 months peaked at 61 percent in December. In the June survey, it had fallen to 39 percent – down 4 percentage points from the previous month and 19 percentage points from the previous year. Ten percent said they believe mortgage rates will drop, up from 6 percent in May and 5 percent in June 2018.

"Growing expectations that mortgage rates will remain steady suggest improved stability for housing affordability and helped keep the HPSI relatively flat this month, despite modest declines in other components," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Regional variations in housing optimism appear to be tied to a divergence in housing affordability; for example, home purchase sentiment is higher in the Midwest and South than in the West and, to a lesser extent, the Northeast, where a lack of entry-level inventory and the resultant strong price appreciation has had a more profound impact on affordability. With fewer consumers expecting rates to jump back up—thereby creating less urgency to buy now—we expect housing market activity to remain stable."

Fifty-six percent considered it a good time to buy a home, down 4 percentage points from May and 3 percentage points from June 2018. Thirty-three percent thought it was a bad time to buy, unchanged from the previous month and up 2 percentage points from the previous year.

Fifty-nine percent said they thought it would be easy to get a mortgage, unchanged from the previous month and up 1 percentage point from the previous year. Forty percent said they thought it would be difficult to get a mortgage, up 2 percentage points from both the previous month and previous year.

Fifty-seven percent said they think home rental prices will go up in the next 12 months, down 8 percentage points from the previous month but up 3 percentage points from the previous year. Just 3 percent said they think rents will go down, unchanged from May and a year-over-year drop of 1 percentage point. On average, respondents expected rental prices to go up 4.2 percent over the next 12 months – down from 5.4 percent in May but up from 4 percent in June 2018.

The share of respondents indicating they would buy their next home if they were to move has been declining steadily in recent months, but a majority—63 percent—still said they would purchase a home. This was down from 65 percent in May and 68 percent in June 2018. Thirty-one percent said they would rent their next home, unchanged from the previous month but a year-over-year increase of 5 percentage points.

Attitudes toward selling conditions remained steady, with 67 percent believing it was a good time to sell – a year-over-year drop of 2 percentage points but up 1 percentage point from May. Twenty-four percent thought it was a bad time to sell, up 1 percentage point from the previous month and 2 percentage points from the previous year.

Forty-eight percent said they think home prices will increase in the next 12 months, down from 50 percent in May and 55 percent in June 2018. Ten percent said they expect prices to drop, up 1 percentage point from both the previous month and previous year. The average respondent expected home prices to grow by 2.5 percent over the next 12 months, down from 3.1 percent in May and 2.6 percent in June 2018.

Eighty-six percent said they were not worried about potentially losing their job in the next 12 months, down from 88 percent in both the previous month and previous year. Thirteen percent said they were concerned about their job stability, up 1 percentage point from both May and June 2018.

Twenty-nine percent said their household income was significantly higher than a year ago, down 2 percentage points from May but a year-over-year increase of 1 percentage point. Nine percent said their household income had dropped significantly, unchanged from the previous year but down 1 percentage point from May.

Fifty-four percent said they expect their personal financial situation to improve in the next 12 months, the same share as in June 2018 and an increase of 4 percentage points from May. Eight percent said they think their financial situation will worsen, down 3 percentage points from the previous month and 4 percentage points from the previous year.

Fifty-two percent considered the U.S. economy to be on the right track, down 1 percentage point from both May and June 2018. Forty percent considered the economy to be on the wrong track, up 6 percentage points from the previous month and 4 percentage points from the previous year.

Fannie Mae's National Housing Survey uses telephone interviews to poll approximately 1,000 people each month to track changes in attitude toward the housing market and economy. Respondents are asked more than 100 questions on these topics.

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