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Housing sentiment decreases for fifth straight month

Tampered by rise in mortgage rates

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Consumers are less optimistic about housing for the fifth month in a row, according to Fannie Mae’s Home Purchase Sentiment Index.

Despite consumer confidence now sitting at the highest level since August 2001, that same confidence did not carry over into housing. After decreasing 0.5 percentage points in November, the HPSI decreased once again in December by another 0.5 points to 80.7 points.

“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,” said Doug Duncan, Fannie Mae senior vice president and chief economist.

“A spike in economic optimism in the immediate aftermath of an election is typical,” Duncan said. “Whether consumers will sustain this level of optimism into 2017 remains unclear.”

The individual components of the index were mixed. Those who said they expected mortgage rates to decrease over the next 12 months fell four percentage points, and those who said their household income is significantly higher today compared to last year fell five percentage points.

However, consumers who say it is a good time to buy a house increased by two percentage points, and those reporting confidence in not losing their job increased by four percentage points.

Americans who said they believe it is a good time to sell a home and those who said home prices will increase remained unchanged.

“The spike in interest rates reflects, in part, the market’s anticipation of pro-growth policies from the incoming Administration,” Duncan said. “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.”

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