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by G. Steven Bray
As we head into the spring home-buying season, Fannie Mae’s latest Home Purchase Sentiment Index (HPSI) presents a somewhat pessimistic picture of the housing market. The index dropped 2.5 points last month to its lowest level since Sep 2014.
Much of the drop can be attributed to consumers’ concerns about the economy. Despite decent government job numbers from the Labor Dept, respondents expressed a significantly greater concern about their job security and household income. This was reflected quite starkly in the right track/wrong track index – the percentage difference between those who think the economy is on the right track versus the wrong track. The index, which has been in a downtrend since Dec, decreased to its lowest level (-25) since Mar 2014.
Also disconcerting are the survey’s good time to sell and buy indicators. The good time to sell indicator fell 8 points, and the good time to buy indicator fell 2 points. This may be a reflection of respondents’ concerns about their financial situation.
While the survey’s results were mostly downbeat, I did see a couple bright spots. Respondents still expected rent and home prices to rise in the coming year, which could give potential homebuyers a sense of urgency. Additionally, respondents expected rents to rise twice as fast as home prices. An increasing percentage also said they would buy rather than rent if they were going to move.
While the concern about the economy is troubling, I’m not convinced the index has turned over. It remains above 80 despite month-to-month variations, and the recent drop may be a reflection of the ongoing political debate. Economic reports continue to be mixed, which suggests a more steady housing market.
Fannie’s housing survey reflects the attitudes of 1000 consumers about the housing market and the economy. Fannie has conducted the survey each month since June 2010. Click here for a link to the survey results at the end of my blog.