Photo: John Gillespie/Flickr
Last month, American consumer confidence rose to its highest level since August 2001, as more Americans felt optimistic about the country’s future and incoming change in leadership. That sentiment, however, did not carry over into housing, according to a new report by government backed mortgage lender Fannie Mae.
Following a decline of 0.5 points in November, the Fannie Mae Home Purchase Sentiment Index (HPSI) decreased by an additional 0.5 points to 80.7 in December. This marked the fifth consecutive month of falling consumer confidence on housing.
According to Fannie Mae senior vice president and chief economist Doug Duncan, while a post-election bump in overall consumer attitudes is typical, rising mortgage rates could in part be dampening housing optimism in consumers — for now, at least.
Respondents who expected mortgage rates to decrease over the next year dropped 4 percentage points in December compared to the previous month. Meanwhile, those who said their household’s annual income was significantly higher now than last year dropped by 5 percentage points from November to 10 percent, undoing some of the gains recorded in November.
And job security — one of the HPSI’s key driving factors — rose to 68 percent in December, an increase of 4 percentage points from the previous month.
But the percentage of respondents who felt it was either a good or bad time to sell remained unchanged from November, at 13 percent and 38 percent respectively. However, the number that felt it was a good time to buy rose 2 percentage points from the previous month to 32 percent in December.
Also unchanged from November, the percentage of respondents who felt home prices would increase held at 32 percent.
“Whether consumers will sustain this level of optimism into 2017 remains unclear. The spike in interest rates reflects, in part, the market’s anticipation of pro-growth policies from the incoming Administration,” Duncan said.
He added that if this optimism is realized, it “should translate into stronger income growth, and increased job security for consumers.” These are two of the strongest factors that influence housing sentiment, and an increase in these two areas could easily drive housing sentiment up in the coming year.
Click here to read the full report.