Fannie Mae: Housing Sentiment Dampened By Rising Rates

The degree of confidence consumers have in the housing market dipped for a fifth consecutive month in December, according to Fannie Mae’s Home Purchase Sentiment Index (HPSI).

The index – which distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey into a single number – fell 0.5 points compared with November to a score of 80.7. What’s more, it was down 2.5 percentage points compared with December 2015.

The share of Americans who said it was a good time to buy a house rose by two percentage points to 32%.

The percentage of those who said it was a good time to sell was unchanged from the prior month at 13%. The share of respondents who said it was a bad time to sell was also unchanged at 38%.

The share of Americans who said that home prices would go up remained constant in December at 35%.

The share of those who said mortgage rates would go down over the next 12 months fell four percentage points to -55%.

The net share of Americans who said they are not concerned about losing their jobs rose four percentage points to 68%.

The share of Americans who said their household incomes were significantly higher than they were 12 months earlier fell five percentage points to 10%, reversing some of the increase seen in November.

“Despite the post-election bump in general consumer attitudes, a rapid rise in mortgage rate expectations has tamped down home purchase sentiment, at least in the near term,” says Doug Duncan, senior vice president and chief economist at Fannie Mae, in a release. “A spike in economic optimism in the immediate aftermath of an election is typical. Whether consumers will sustain this level of optimism into 2017 remains unclear.”

Duncan added that the recent spike in mortgage interest rates “reflects, in part, the market’s anticipation of pro-growth policies from the incoming administration.”

“If this optimism comes to fruition, it should translate into stronger income growth and increased job security for consumers – the two HPSI components that could help support housing sentiment this year,” Duncan adds.

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