With more Americans reporting lower income prospects, Fannie Mae’s Home Purchase Sentiment Index™ (HPSI) decreased 2.4 points to 80.8 in November. The challenge of housing affordability coupled with tight supply may be preventing overall housing sentiment from gaining momentum as income growth isn’t keeping pace with the cost of housing.
Consumers’ net attitudes about the direction of their household income relative to a year ago fell 5 points during the month, setting this HPSI component back to just below its March 2015 level. The HPSI Good Time to Sell component fell 6 points on net this month while Good Time to Buy was the only component to improve, increasing 1 point on net.
“The latest reading of the Home Purchase Sentiment Index remains near the survey’s high witnessed in June, exemplifying the theme we laid out at the beginning of the year: the economy drags housing upward,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “While aggregate income growth has gradually picked up with a continually improving labor market, consumers’ assessment of their income over the past year has not yet shown sustained improvement, partially weighing on overall sentiment. This year’s housing market is poised to be the best since 2007; however, consumers’ ability and willingness to purchase a home is likely to remain an issue in many regions going forward until we see consumer confidence in their income growth consistently gain traction.”
Concern about job loss remains minimal, with the percentage of respondents who are unconcerned about losing their job remaining relatively flat in November at 84 percent. Overall, the HPSI is down 0.2 points since this time last year.
Home Purchase Sentiment Index – Component Highlights
- The net share of respondents who say that it is a good time to buy a house rose 1 percentage point to 35 percent.
- The net percentage of respondents who say it is a good time to sell a house fell for the second month in a row – dropping 6 percentage points to 4 percent in November.
- The net share of respondents who say that home prices will go up remained constant at 38 percent.
- The net share of those who say mortgage interest rates will go down fell 2 percentage points to negative 48 percent.
- The net share of respondents who say they are not concerned with losing their job fell 2 percentage points to 69 percent, falling for the first time since July.
- The net share of respondents who say their household income is significantly higher than it was 12 months ago fell 5 percentage points to 6 percent.
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