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Fannie Mae: Consumer confidence in housing market fell in October

Survey results show that consumers felt September was better market

Consumers’ feelings towards the housing market were weaker in the month of October than they were in September, as some consumers displayed hesitancy to commit to the long-term financial obligation of buying a home, a new survey from Fannie Mae showed.

Released Monday, Fannie Mae’s Home Purchase Sentiment Index for October 2015 decreased slightly to 83.2 in October as consumers’ volatile outlook on both household income improvement and mortgage interest rates kept housing sentiment relatively flat.

According to Fannie Mae, the Home Purchase Sentiment Index condenses information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey 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.

In October, the HPSI Household Income component fell 4 points on net this month and the Good Time to Buy and Good Time to Sell components fell 2 and 6 points, respectively, after picking up in September.

While those number fell in October, signifying weakening confidence in the housing market, the survey results showed that consumers appeared to be less worried about job loss, with the net figure nearing the most favorable reading in the five-year history of Fannie Mae’s National Housing Survey.

Additionally, the share of consumers who think mortgage interest rates will go down increased by 4 points on net in October.

“The income growth necessary for renewed momentum in housing market sentiment remains elusive, even though consumers’ confidence in their job security continues to strengthen,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

“Consumers’ net view on whether their household income has improved over the last year is down once again this month,” Duncan continued.

“Some consumers may be hesitant or unwilling to commit to buying or selling a home without seeing meaningful improvement in their wages and salaries,” Duncan added. “Still, the HPSI remains close to its near all-time high level of the past four years and, given the strong October jobs report, suggests that any cooling in near-term activity, if it occurs, should be moderate.”

Overall, Fannie Mae’s October 2015 Home Purchase Sentiment Index decreased 0.6 percentage points to 83.2 in October following a 3-point increase last month to near its peak level.

Of the six component questions, net positive responses rose for three components and fell for three components. Most notably, the Good Time to Sell and Household Income components decreased 6 and 4 points on net, respectively, while Mortgage Rate net expectations increased 4 points.

According to Fannie Mae, the HPSI is up 0.7 points since this time last year.

Additionally, the Fannie Mae survey also showed:

  • The net share of respondents who say that it is a good time to buy a house fell 2 percentage points to 34% after climbing the prior two months.
  • The net percentage of respondents who say it is a good time to sell a house fell 6 percentage points to 10% in October, dropping from September’s survey high.
  • The net share of respondents who say that home prices will go up rose 2 percentage points to 38%.
  • The net share of those who expect mortgage interest rates to drop rose 4 percentage points to negative 46%, stopping the trend of net decreases in the last few months.
  • The net share of respondents who say they are not concerned with losing their job rose 2 percentage points to 71%, and has risen each month since July. The percent of respondents who are not concerned about losing their job reached an all-time high of 85%.
  • The net share of respondents who say their household income is significantly higher than it was 12 months ago fell 4 percentage points to 11%.

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