Housing Sentiment Dips as High Home Prices Weigh on Buyers and Economic Conditions Weigh on Sellers

Matthew Classick

202-752-3662

WASHINGTON, DC – The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased 1.5 percentage points in July to 86.8, after matching its all-time high in June. The decline can be attributed to decreases in three of the six HPSI components. The net share who reported that now is a good time to buy a home fell 7 percentage points, with the share who say it’s a bad time to buy reaching a new survey high and the share who say it’s a good time to buy reaching a new survey low. The net share of those who say it is a good time to sell a home decreased by 11 percentage points, following June’s survey high. Americans also expressed a greater sense of job security, with the net share who say they are not concerned about losing their job rising by 9 percentage points. Additionally, consumers continued to express that their current household income is not significantly higher than it was 12 months ago, with that component falling an additional percentage point in July. Finally, the net share of Americans who expect home prices to go up also increased by 1 percentage point this month, following last month’s upward trend.

The decline in selling sentiment was the biggest drag on the index, followed by the drop in buying sentiment. Underlying data showed that economic conditions weighed on the former.  Among consumers who believe now is a bad time to sell, the share citing economic conditions as a primary reason posted a sharp rise.  Nearly half of consumers who say now is a bad time to buy cited rising prices as a primary concern—a survey high.

“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 rising uncertainty regarding the outlook for pro-growth legislation this year, could weigh on overall housing sentiment in the second half of the year.”

HOME PURCHASE SENTIMENT INDEX – COMPONENT HIGHLIGHTS

Fannie Mae’s 2017 Home Purchase Sentiment Index (HPSI) decreased in July by 1.5 percentage points to 86.8. The HPSI is up 0.3 percentage points compared with the same time last year.

• The net share of Americans who say it is a good time to buy a home fell 7 percentage points to 23%, reaching a new survey low, with the share who say it’s a bad time to buy and the share who say it’s a good time to buy reaching a new survey high and low, respectively.
• The net percentage of those who say it is a good time to sell decreased by 11 percentage points to 28% after reaching a survey high in June.
• The net share of Americans who say that home prices will go up increased by 1 percentage point in July to 47%, following the upward trend from last month.
• The net share of those who say mortgage rates will go down over the next twelve months remained the same at   -49%.
• The net share of Americans who say they are not concerned about losing their job rose by 9 percentage points to 75%, reversing the decrease from last month.
• The net share of Americans who say their household income is significantly higher than it was 12 months ago continued to decrease, falling 1 percentage point in July to 16%.

ABOUT FANNIE MAE’S HOME PURCHASE SENTIMENT INDEX

The Home Purchase Sentiment Index (HPSI) distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey® (NHS) into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

ABOUT FANNIE MAE’S NATIONAL HOUSING SURVEY

The most detailed consumer attitudinal survey of its kind, Fannie Mae’s National Housing Survey (NHS) polled 1,000 Americans via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). As cell phones have become common and many households no longer have landline phones, the NHS contacts 60 percent of respondents via their cell phones (as of October 2014). For more information, please see the Technical Notes. Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future. The July 2017 National Housing Survey was conducted between July 1, 2017 and July 23, 2017. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by Penn Schoen Berland, in coordination with Fannie Mae.

DETAILED HPSI & NHS FINDINGS

For detailed findings from the July 2017 Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results.

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