Mortgage

Fannie Mae: Home buying sentiment weakens as economic uncertainty grows

In September, Fannie's HPSI fell by 2.3 points

In September, housing confidence weakened as the nation’s economic woes dampened consumer confidence, according to Fannie Mae’s Home Purchase Sentiment Index.

The GSE’s report reveals that sentiment fell 2.3 points in September to 91.5. Although this rate is a decline from last month’s survey high, it still remains 3.8 points above 2018’s rate.

“Consumer sentiment remains relatively strong overall, though uncertainty about the economy and individual financial circumstances appear to be weighing on housing market attitudes a bit more than a month ago,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist. “Views about the direction of the economy held relatively steady, and the share of respondents who say it’s a good time to buy or sell a home rose slightly.”

According to Fannie’s report, the “Good Time to Buy” and “Good Time to Sell” components inched forward in September, rising by 3 and 4 percentage points, respectively.

However, the GSE indicates that the component measuring the net share of Americans who believe mortgage rates will go down in the next 12 months, fell 6 percentage points to -23%.

This is surprising as mortgage rates, which came in at 3.64% last week, are now projected to sink as low as 3.3% by the end of the year.

So, what could be spurring this pessimism?

Duncan says it may have a lot to do with consumer attitudes regarding the overall economy.

“Consumers who are pessimistic about current housing market conditions are more likely to cite unfavorable economic conditions than the prior month,” Duncan said. “Job confidence remains high but still well shy of its July reading.”

According to the index, the net share of Americans who say they are not concerned about losing their job fell 8 percentage points during September.

Earlier this year, a panel of more than 100 housing experts and economists announced they expected the nation’s next recession to hit as early as 2020

Real estate brokerage company Redfin says that although the housing market is unlikely to be a culprit or victim of this recession, many Americans are still at risk of being laid off during the economic downturn.

“If the U.S. enters a recession in the next two years, it will likely be caused by the global trade war,” said Daryl Fairweather, Redfin chief economist. “U.S. industries that rely on exports, like the automotive industry and the agricultural industry, would be the most vulnerable and susceptible to layoffs.”

“Homeowners who are laid off may not be able to continue covering their monthly mortgage payment and may be forced to sell their homes, Fairweather said. “And would-be homebuyers won’t feel so confident about making a big purchase when they don’t feel confident about their job security or their financial wellbeing.”

Despite this added uncertainty, Duncan says that September’s HPSI indicates continued strength in overall housing attitudes. After all, September’s confidence level is nearly 4 percentage points higher than last year’s rate.

NOTE: Fannie Mae’s Home Purchase Sentiment Index is constructed from six questions, gauging the current views and forward-looking expectations of consumers navigating the housing market.

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