Fannie Mae: Housing sentiment remains strong at end of year

Consumer attitudes toward the housing market and economy remained favorable at the end of 2019, according to Fannie Mae.

Fannie Mae's Home Purchase Sentiment Index for December stood at 91.7, up 0.2 points from November and a year-over-year gain of 7.6 points. The index is based on six factors from Fannie Mae's National Housing Survey, including whether respondents believe it is a good time to buy or sell a home, expected changes to home prices and mortgage rates, changes in household income, and concern about potential unemployment.

"The continued strength in the HPSI attests to the intention among consumers to purchase homes. This is consistent with the Fannie Mae forecast for 2020," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "The HPSI hit and remained near an all-time high in 2019, driven by the 16-percentage point year-over-year increase in the share of consumers believing it is a good time to buy. The HPSI's strength supports our prediction of a healthy housing market in 2020, as well as consumers' appetite and ability to absorb the expected increase in entry-level inventory."

Most indicators showed little change from the previous month, though respondents were more optimistic about purchasing a home than they were a year earlier. Fifty-nine percent thought it was a good time to buy a home, down 2 percentage points from the previous month but up 7 percentage points from December 2018. Thirty-two percent considered it a bad time to buy a home, up 3 percentage points from the previous month but down 9 percentage points from the previous year.

Thirty-nine percent said they think mortgage rates will go down in the next 12 months, unchanged from November but down from a high point of 61 percent in December 2018. Seven percent said they think rates will drop, down from 11 percent in November but up from 5 percent in December 2018.

Attitudes toward getting a mortgage stayed within a tight range during 2019. Fifty-eight percent said they think it would be easy to get a mortgage, down from 59 percent in the previous month but up from 55 percent in the previous year. Forty percent said they think it would be difficult to get a mortgage, up 1 percentage point from the previous month but down 3 percentage points from the previous year.

Sixty-six percent of respondents said they would buy their next home if they were to move, unchanged from the previous year but down from 67 percent in the past two months. Twenty-eight percent said they would rent, unchanged from the previous month and down 1 percentage point from the previous year.

Sixty-one percent said they think rental prices will increase in the next 12 months, up 1 percentage point from the previous month and 3 percentage points from the previous year. Four percent said they think rental prices will decrease, up from 2 percent in November and 3 percent in December 2018. On average, respondents said they think rental prices will grow by 4.8 percent over the next 12 months – up from 4.3 percent in November and 4.7 percent in December 2018.

Attitudes toward home selling conditions were fairly consistent throughout 2019. Sixty-five percent thought it was a good time to sell, down 1 percentage point from the previous month but up 1 percentage point from the previous year. Twenty-two percent thought it was a bad time to sell, down from 26 percent in November and 28 percent in December 2018.

Half of December's respondents said they think home prices will go up in the next 12 months, up 6 percentage points from the previous month and 5 percentage points from the previous year. Ten percent said they think home prices will go down, unchanged from the previous month and 4 percentage points lower than in December 2018. On average, respondents said they think price will grow by 2.9 percent – up from 2.8 percent in the previous month and 2.3 percent in the previous year.

For the third consecutive month, 86 percent said they are not concerned about losing their job in the next 12 months – down from 89 percent in December 2018. Twelve percent said they were worried about potential unemployment, down 2 percentage points from the previous month but up 2 percentage points from the previous year.

Twenty-eight percent said their household income was significantly higher compared to 12 years earlier, unchanged from the previous two months and down from 31 percent in December 2018. Eleven percent said their income had dropped significantly, up 1 percentage point from November but down 1 percentage point from December 2018.

Half of the month's respondents said they think their personal financial situation will improve over the next 12 months, down 1 percentage point from the previous month but up 2 percentage points from the previous year. For the third consecutive month, 9 percent said they think their financial situation will worsen – down 3 percentage points from the previous year.

Fifty-three percent said they consider the U.S. economy to be on the right track, down 4 percentage points from November but up 3 percentage points from December 2018. Thirty-six percent said they think the economy is on the wrong track, a year-over-year drop of 4 percentage points but up 3 percentage points from the previous month.

Fannie Mae's National Housing Survey is issued each month, polling approximately 1,000 American adults via telephone interview. Respondents are asked more than 100 questions to track changes in attitudes toward the housing market and economy.

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