Fannie Mae Archives

Money Matters Hold Back Housing Sentiment

The number of Americans who say it’s a good time to sell a house rose 5 percent in June, according to Fannie Mae’s monthly Home Purchase Sentiment Index. That represents an all-time survey high. Combined with a 3 percent bump in the number of survey respondents who said it was a good time to buy a house, the results seem to show an increasing optimism about the real estate market. But though participants may see opportunity, concerns about their personal income and the direction of the overall economy may be holding them back. In fact, money worries led to a 2.1 percent drop in overall sentiment from the previous month’s highs. “The HPSI’s pullback in June from last month’s survey-high reading suggests a slight weakening in the 12-month outlook for housing activity,” Doug Duncan, Fannie Mae’s senior vice president and chief economist, said. “Pending home sales have pulled back in the face of continued home price growth, and we’re seeing some softening in the higher priced components of the market. Growing pessimism about the overall direction of the economy gives us further pause as it now stands at the highest level we’ve seen in our National Housing Survey in the last two years.” According to Duncan, real improvement will require more affordable homes available for sale and a significant boost in Americans’ income growth perceptions. More here.

Housing Market Improves Despite Jobs Dip

An improving job market has been one of the many positive economic trends credited with helping lift the housing market over the past few years. Analysts believed real estate would overcome periods of volatility and continue to show long-term improvement based on the fact that more Americans were finding work and reporting higher incomes. In May, however, a weaker-than-expected jobs report made news at a time when the housing market was beginning to pick up. So should you expect a downturn if employment begins to weaken? According to Fannie Mae’s monthly forecast from their Economic & Strategic Research Group, not necessarily. In fact,the group didn’t adjust their forecast for economic growth this year and Doug Duncan, Fannie Mae’s chief economist, says the housing market is getting stronger. “Housing activity is gaining strength heading into the summer, with pending home sales rising to a decade high. In addition, new home sales surged to an expansion best, a positive for single-family homebuilding, especially since only a small share of new homes for sale are completed and ready to occupy,” Duncan said. “However, recent pullbacks in construction hiring, likely due to a shortage of skilled workers, could weigh on the outlook for the sector. With little improvement in the current housing supply so far, we expect only moderate housing expansion this year.” Duncan also said that, though the Fed decided not to raise interest rates at their latest meeting, he expects they will likely raise rates again at some point this year. More here.

Outlook Finds Lenders Feeling Optimistic

Applying for a loan is often the first step a buyer makes toward becoming a homeowner. And, because lenders are a buyer’s first stop, they’re often the first to notice which way the housing market is trending. For this reason, Fannie Mae conducts a quarterly survey that gauges current mortgage activity and how optimistic lenders feel going into the next quarter. According to the results of the most recent survey, mortgage lender sentiment has rebounded after seeing declines in previous quarters. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says lenders are feeling more optimistic but still cautious. “Key survey sentiment indicators suggest that lenders remain cautiously optimistic in their market outlook,” Duncan said. “The outlook for purchase demand growth over the next three months returned to levels similar to last year, while the outlook for refinance demand and profit margin improved moderately versus last year’s levels. Additionally, the trend toward easing of credit standards appears to be tapering off, as the vast majority of lenders, around 90 percent, reported plans to keep their credit standards about the same.” More here.

Rising Incomes Help Hopeful Home Buyers

The current housing market is a mixed bag. On the one hand, mortgage rates remain near record lows. At the same time, home price increases are causing affordability concerns. Additionally, home buyer demand is high but the number of homes available for sale is low. Because of this, recent results of Fannie Mae’s monthly Home Purchase Sentiment Index have been volatile. In March, sentiment hit an 18-month low. Then, according to the most recent release, it reached an all-time survey high in May. Partly, the increase in optimism was due to a 7 percent jump in the number of Americans who said their income was significantly higher than it was a year ago. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says rising incomes and low mortgage rates could help home buyers facing higher prices and fewer choices. “Continued home price appreciation has been squeezing housing affordability, driving a two-year downward trend in the share of consumers who think it’s a good time to buy a home,” Duncan said. “The current low mortgage rate environment has helped ease this pressure, and fewer than half of consumers expect rates to go up in the next year. While the May increase in income growth perceptions could provide further support to prospective home buyers as the spring/summer home buying season gains momentum, the effect may be muted by May’s discouraging jobs report.” More here.

Spring Rebound To Follow Slow 1st Quarter

Much like last year, the first quarter of 2016 was slower than expected. Both the housing market and broader economy showed weakness amid harsh winter weather and global economic uncertainty. But also like last year, Fannie Mae’s Economic & Strategic Research Group says economic growth should rebound in the spring and continue to grow through the remainder of the year. Doug Duncan, Fannie Mae’s chief economist, says an uptick in hours worked and average hourly earnings should help support consumer spending, which will help boost the economy. He also expects home sales to climb. “Home sales are expected to pick up heading into the spring season amid the backdrop of declining mortgage rates, rising pending home sales and purchase mortgage applications, and continued easing of lending standards on residential mortgage loans,” Duncan said. “Meanwhile, the homeownership rate showed signs of stabilizing during the first quarter of this year, as the relatively high homeownership rates among Baby Boomers have helped offset low homeownership rates among Millennials, many of whom remain on the sidelines due to ongoing affordability issues.” More here.

More Homeowners See Opportunity To Sell

A combination of higher home prices and strong buyer demand is convincing more current homeowners that selling their house may be a good idea. According to Fannie Mae’s most recent Home Purchase Sentiment Index – which measures Americans attitudes toward buying and selling a home, renting, household finances, mortgage rates, etc. – April saw a 16 percent increase in the number of consumers who said now was a good time to sell a house. Doug Duncan, Fannie Mae’s chief economist, says that could be good news for both current homeowners and prospective buyers. “We can partially attribute the sizable gain in April in home selling optimism both to a correction for last month’s unexpected dip and to typical seasonal strength in housing activity in the spring and summer,” Duncan said. “Even after accounting for these factors, tight housing supply has led to renewed strength in home price appreciation, making selling a home a more attractive prospect this year in particular. This improved sentiment could provide an extra boost of much-needed supply for the spring selling season.” An increase in available homes for sale would help balance the market, slow down the rate of home price increases, and provide house hunters with more homes to choose from. More here.

Outlook Unchanged Despite Slow Growth

Despite the fact that economic growth stalled during the first quarter of the year, the outlook for the remainder of the year has not changed, according to Fannie Mae’s Economic & Strategic Research Group’s April 2016 Economic and Housing Outlook. In fact, the group’s latest forecast calls for a pickup in consumer spending and overall growth during the second quarter. Doug Duncan, Fannie Mae’s chief economist, says the housing market should also remain steady, despite some challenges. “Our forecast for housing activity, mortgage rates, and mortgage originations are little changed in the April forecast,” Duncan said. “We expect total mortgage originations to decline about 9 percent in 2016 to $1.56 trillion, with a refinance share of 40 percent. Sustained improvement in the labor market and personal incomes among young adults should draw more potential home buyers into the housing market, but many will continue to face affordability challenges. Home price growth has been rising at a faster clip than incomes, and the increasing supply of single-family housing is skewed toward larger and less affordable homes. These factors continue to weigh on housing affordability, particularly for first-time home buyers.” More here.

Home Purchase Sentiment Dips In March

Fannie Mae’s Home Purchase Sentiment Index is based on the results of a monthly survey that asks Americans about their attitudes toward buying and selling a home, the economy, their household finances, home prices, mortgage rates, etc. In March, the index dropped 2.5 points from the previous month. This indicates Americans are feeling more cautious about the housing market and less optimistic about their jobs and income. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says Americans’ feelings about the housing market are starting to become affected by pessimism about the overall economy. “Growing pessimism over the last three months about the direction of the economy seems to be spilling over into home purchase sentiment,” Duncan said. “The gap between the share of consumers who think the economy is on the wrong track and the share who think it is on the right track has widened, nearly matching its reading last August, when concerns regarding China and oil prices led to the biggest stock market plunge in years. In turn, we saw dips this month in income growth perceptions, attitudes about the home selling climate, and job confidence, all of which contributed to the lowest HPSI reading in the last year and a half. These declines seem to be at odds with recent news of solid overall job creation, but may reflect weakening economic performance in certain industries.” Still, despite the monthly dip, the index remains virtually unchanged from where it was at the same time last year. More here.

Wages, Home Prices Key To Housing Growth

Last year, high hopes for the housing market looked bleak during what turned out to be a slow winter. Harsh weather stalled activity in some parts of the country and the experts and analysts began to question their optimistic outlook for the year. As spring rolled in, however, sales picked up and 2015 turned out to be a strong overall year for the residential real estate market. This year got off to a similarly slow start. But, according to Fannie Mae’s most recent Economic and Housing Outlook, financial market conditions now appear to be improving and, though challenges remain, strong consumer and business spending combined with a healthy labor market is expected to keep the economy stable. Doug Duncan, Fannie Mae’s chief economist, says that, while the economy has regained its footing, many Americans aren’t seeing similar gains in their income and – along with higher home prices – it’s beginning to cause concern. “A less optimistic outlook for future wage gains, especially among small business employees, coupled with continued strong home price appreciation boosted by lean inventory, is adding to the housing affordability challenge,” Duncan said. “Our latest Home Purchase Sentiment Index shows that high home prices are a top reason for consumers’ perception that it’s a bad time to buy a home. However, low mortgage rates should help support moderate housing expansion as we move through the year.” More here.

More Americans Say Now’s The Time To Buy

A rising number of Americans say now is a good time to buy a house, according to the results of Fannie Mae’s most recent Home Purchase Sentiment Index. The Index – which measures Americans’ perception of the economy and housing market, as well as their personal financial situation – found a 4 percent improvement in the number of respondents who felt it was the right time to buy. That gain could be due to the fact that Americans increasingly feel confident that they aren’t in danger of losing their jobs. It could also be attributed to a feeling that home price increases are beginning to slow. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says slower price appreciation could bring some relief to buyers. “Our February results show the most modest consumer home price expectations since late 2012,” Duncan said. “For consumers who think it’s a bad time to buy a home, whose share has trended up from its recent low last November, high home prices have been an increasingly contributing factor. A slower pace of home price appreciation may provide some relief for potential homebuyers, especially first-time buyers who couldn’t reap the benefits of selling a home at high prices to buy another one.” This combination of increasing financial security and a positive perception of market conditions could help motivate more Americans to think about buying a house this year. More here.