Fannie Mae's Home Purchase Sentiment Index retreated for the second consecutive month in October, with fewer respondents reporting higher household income or optimism toward home buying conditions. However, Fannie Mae said the index remains near a survey high set in August.

The index is based on the net share of six components from Fannie Mae's National Housing Survey, including whether respondents think it is a good time to buy or sell a home, expected changes to home prices and mortgage rates, increases in household income, and job confidence. October's figure stood at 88.8, down 2.7 points from the previous month but a year-over-year increase of 3.1 points.

Compared to September's survey, respondents were less confident on all factors except job security. Perceptions were unchanged or more pessimistic compared to the previous year, but slightly more likely to say it was a good time to sell and considerably more likely to expect mortgage rates to go down.

"Consumer home purchase sentiment remains robust, with the HPSI still near its survey high despite dipping for a second consecutive month," said Doug Duncan, senior vice president and chief economist. "The 'good time to buy' component has declined notably, despite low mortgage rates, due in part to the persistent challenge of a lack of affordable housing supply. In turn, the net share of consumers expecting home prices to increase over the next 12 months has fallen to its lowest reading in seven years. Still, low mortgage rates and a strong labor market are supporting the index's overall strength, which is consistent with our expectation for a modest expansion in home purchase activity in the fourth quarter."

Fifty-seven percent considered it a good time to buy a home, down 2 percentage points from the previous month but up 2 percentage points from the previous year. Thirty-six percent thought it was a bad time to buy, up from 34 percent in October 2018 and 31 percent in September.

Thirty-seven percent said they thought mortgage rates will go up in the next 12 months, down 1 percentage point from the previous month. Compared to October 2018, when the average rate was reaching a peak of nearly 5 percent, this response was down by 24 percentage points. Twelve percent said they expect rates to decrease, down 3 percentage points from the previous month but up 8 percentage points from the previous year.

Respondents were increasingly likely to expect that it would be difficult to get a mortgage. Forty percent held this opinion, up from 36 percent in August and 37 percent in September but a year-over-year drop of 5 percentage points. Fifty-seven percent said they thought it would be easy to get a mortgage, down from 62 percent in August and 59 percent in September but up from 52 percent in October 2018.

Sixty-seven percent said they would buy their next home if they were to move, down 2 percentage points from both the previous month and previous year. Twenty-nine percent said they would rent, up 2 percentage points from September and 3 percentage points from October 2019.

Fifty-seven percent said they think home rental prices will go up in the next 12 months, unchanged from the previous year but up 1 percentage point from September. The share expecting rental prices to drop held steady at 4 percent. On average, respondents said they expect rental prices to increase by 4.3 percent over the next 12 months – unchanged from the previous year and on par with September's expectation of 4.2 percent.

Selling attitudes remained fairly steady. Sixty-seven percent thought it was a good time to sell a home, unchanged from the previous month but a year-over-year gain of 5 percentage points. Twenty-six percent thought it was a bad time to sell, up 3 percentage points from September but down 1 percentage point from October 2018.

Forty-one percent said they believe home prices will go up in the next 12 months, sliding from 47 percent in August and 43 percent in September; this also marked a year-over-year decline of 5 percentage points. Fourteen percent said they think prices will go down, unchanged from the previous month and up 5 percentage points from the previous year. On average, respondents expected home prices to grow by 1.8 percent over the next 12 months – creeping up from 1.7 percent in September but down from 2.6 percent in October 2018.

Eighty-six percent said they aren't worried about losing their job in the next 12 months, up 2 percentage points from September but down 3 percentage points from October 2018. Fourteen percent said they worry that they might lose their job, down 1 percentage point from the previous month but up 3 percentage points from the previous year.

Twenty-eight percent said their household income is significantly higher than it was 12 months ago, down 3 percentage points from September and 1 percentage point from October 2018. Twelve percent said their income is significantly lower, up 2 percentage points from both the previous month and previous year.

Respondents were more optimistic about the future, with 53 percent saying they expect their personal financial situation to improve in the next 12 months – jumping 5 percentage points from the previous month and 6 percentage points from the previous year. Nine percent said they expect their personal financial situation to get worse, unchanged from September and down 2 percentage points from October 2018.

Attitudes toward the U.S. economy have improved steadily in recent months. Fifty-four percent said they consider the economy to be on the right track, up from 50 percent in August and 51 percent in September but down from 59 percent in October 2018. Thirty-eight percent said they consider the economy to be on the wrong track, down from 41 percent in August and 40 percent in September but a year-over-year increase of 5 percentage points.

Fannie Mae's National Housing Survey surveys a nationally representative sample of about 1,000 households each month. Respondents are asked more than 100 questions to gauge attitudinal shifts regarding the housing market and economy.