First Phase of Housing Recovery Decelerates as Consumer Caution Continues

Katie Penote

202-752-2261

WASHINGTON, DC – Americans' attitudes toward the housing market remain mixed, although a steady improvement in their personal financial outlook may bode well for housing in the coming months, according to results from Fannie Mae’s July 2014 National Housing Survey. 

"The continued cautious sentiment expressed across the range of consumer indicators this month gives weight to our view that the first phase of the housing recovery is decelerating, and 2014 will be a year of mixed housing outcomes with home prices rising more slowly and home sales falling slightly," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "We have always believed that for the housing recovery to be considered robust, we will need strong and sustained full-time job and income growth. Recent data indicating the creation of more than 200,000 jobs over each of the last six months, combined with this month's improvement in the share of consumers reporting significantly higher household income than a year ago, does provide some reason for optimism. If these trends continue, they could lead to some upside in housing in 2015."

On average, consumers' 12-month home price change expectation dipped again in July, falling slightly to 2.3 percent, and the share of respondents who expect home prices to climb in the next year also continued on a downward trend, falling to 42 percent. Additionally, consumer attitudes about the direction of the economy overall have grown more negative – the share of respondents who believe the economy is on the wrong track increased by 5 percentage points from last month to 59 percent.

However, the gap has narrowed between the share of consumers who say now is a good time to buy a home versus those who say it is a good time to sell, indicating a better balance of supply and demand in the market. In addition, the share of consumers who say their home has increased in value since they bought it rose to an all-time survey high, which suggests a long-term positive trend for household balance sheets that may encourage more potential buyers and sellers to enter the market. Consumers' rising optimism about their personal financial situation also may foreshadow more positive housing sentiment. Those who say their income is significantly higher than it was 12 months ago increased 4 percentage points to a survey high of 28 percent, while those who say their personal financial situation has gotten worse within the last year declined to a survey low of 17 percent.

SURVEY HIGHLIGHTS

Homeownership and Renting

• The average 12-month home price change expectation fell to 2.3 percent.
• The share of respondents who say home prices will go up in the next 12 months continued its downward trend, falling to 42 percent. The share who say home prices will go down also decreased—to 8 percent.
• The share of respondents who say mortgage rates will go up in the next 12 months fell by one percentage point to 54 percent.
• Those who say it is a good time to buy a house fell to 67 percent, and those who say it is a good time to sell a house rose to 43 percent—tying the survey high.
• The average 12-month rental price change expectation decreased to 3.8 percent.
• The percentage of respondents who expect home rental prices to go up fell to 51 percent.
• Half of respondents thought it would be difficult for them to get a home mortgage today.
• The share who say they would buy if they were going to move fell slightly to 67 percent.

The Economy and Household Finances

• The share of respondents who say the economy is on the wrong track increased by 5 percentage points from last month to 59 percent.
• The percentage of respondents who expect their personal financial situation to get better over the next 12 months dropped to 40 percent.
• The share of respondents who say their household income is significantly higher than it was 12 months ago increased by 4 percentage point to 28 percent—a survey high.
• The share of respondents who say their household expenses are significantly higher than they were 12 months ago fell 2 percentage points to 36 percent.

The most detailed consumer attitudinal survey of its kind, the Fannie Mae National Housing Survey 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 (findings are compared to the same survey conducted monthly beginning June 2010). 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.

For detailed findings from the July 2014 survey, as well as a podcast providing an audio synopsis of the survey results and technical notes on survey methodology and questions asked of respondents associated with each monthly indicator, please visit the Fannie Mae Monthly National Housing Survey page on fanniemae.com. Also available on the site are in-depth topic analyses, which provide a detailed assessment of combined data results from three monthly studies. The July 2014 Fannie Mae National Housing Survey was conducted between July 1, 2014 and July 21, 2014. 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.