Today we’re going to take a look at the latest Home Buyers Sentiment Index survey just released by Fannie Mae. And for those of you who may not be familiar with this survey, this is actually quite important. I keep up with this because it’s the only national monthly consumer survey that focuses primarily on housing.
The survey shows the responses of 1,000 consumers across the country to approximately 100 survey questions on a wide range of housing-related topics. Now don’t worry, we’re not going to look at all 100 questions – just the ones that solicit consumer feedback on housing market conditions and also touch on topics related to their home buying decisions.
So, as you can see below, the overall index tended to rise fairly steadily until the pandemic hit, which had massive, but temporary, impacts. And by looking at the past three years, you can get a better idea of the speed of the decline induced by the pandemic. Quite remarkable.
You will also see that the index has recovered fairly quickly. However, it fell again last fall as the pandemic was not moving away at the speed many had hoped for. It started to rise again this spring but has been declining for a few months. However, the level of the index for August was essentially the level observed in July.
Is it a good time to buy?
Now let’s take a look at the questions that are used to create the index number and how consumers responded.
When asked if it was the right time to buy a home, the percentage of those who agreed with this statement rose from 28 to 32 percent, while the share who thought it was a bad time to buy fell from 66 percent to 63 percent.
As a result, the net share of those who say it’s a good time to buy jumped seven points month-over-month, and it is noteworthy that this is the first time that the number of shares net has improved over the past four months.
What I’m seeing here is that, while improving modestly, the general consensus is that now is not a good time to buy, and that feeling is driven by two things. No. 1: There is still not enough housing on the market. N ° 2: The rapid rise in prices scares some people.
Is it a good time to sell?
When asked if they thought it was the right time to sell their home, it was interesting to see this share drop from 75 to 73 percent, while the percentage of people who said it was a bad time to sell fell 1 point to 19 percent.
As a result, the net share of those who said it was a good time to sell fell 1%, but this still indicates that more homeowners think it is a good time to sell than not.
Will prices go up or down over the next 12 months?
Looking now at the direction of home prices over the next 12 months, the percentage of people who think house prices will go up has increased from 46 percent to 40 percent, while the percentage who expects prices to fall of homes fell from 21 to 24 percent.
As a result, the net share of Americans who say home prices will rise fell nine points, from 25 percent to 16 percent.
While it may sound worrisome, I should add that the share of respondents who thought house prices would remain static over the next year has risen from 27 percent to 31 percent.
Mortgage rate expectations
On the financing side, the share who believed mortgage rates will rise over the next 12 months fell from 57 to 53 percent, while the percentage who thought rates would be lower fell from 5 percent to 6 percent. hundred.
As a result, the net share of Americans who believed mortgage rates would drop in the next 12 months rose 5%. And with 35% of respondents believing rates will stay stable, it’s clear to me that a large majority aren’t worried about rising mortgage rates.
The takeaways for me so far are that consumers have tempered both their recent pessimism about home buying conditions and their rising expectations for home price growth.
In particular, a larger proportion of consumers think it is the right time to buy a home – although this population remains a staunch minority at just 32% – while the plurality continues to expect prices to be higher. of homes increase over the next 12 months fell but was still well above the 24 percent of consumers who believe home prices will go down.
Are you worried about losing your job?
Now, there are two more questions worth considering which are not directly related to home buyers and sellers, but which are still important when looking at employment and income.
The percentage of respondents who said they were not worried about losing their job in the next 12 months remains very high at 82%, but it has fallen by two points month over month, while the percentage who has said being worried climbed to 15 percent from 13 percent.
As a result, the net share of Americans who say they are not worried about losing their job fell 4 percentage points month over month, but remains well above the level of a year ago.
Is household income higher now than 12 months ago?
And finally, when households were asked about their own personal finances, the percentage of respondents who said their household income is significantly higher today than it was 12 months ago has declined dramatically. ‘a point to 26%, while the percentage who said their household income is significantly lower and drops to 12%.
As a result, the net share of those who reported their household income to be significantly higher than a year ago rose 1% month over month and rose five percentage points from one year ago.
It’s also worth noting that most said their household income was about the same as a year ago, with that share rising from 56% to 59%.
Looking at all the numbers together, the level of the index was relatively stable in August, with three of the six components of the index increasing month over month, while the other three fell. .
This tells me that the continued strength in housing demand and definitely favorable conditions for home sellers may well offset wider concerns about the Delta variant of COVID-19 as well as rising inflation that have both had a negative impact on other consumer confidence indices.
Most consumers continued to report that it was a good time to sell a house but a bad time to buy, and most often cited high house prices and lack of supply as the main rationale.
However, the ‘good time to buy’ component, although still close to a low in the survey, increased for the first time since March, perhaps in part due to the very favorable mortgage rate environment as well. as growing expectations that home prices will begin to appreciate. to moderate over the next year. A feeling with which I personally agree.
Well, I hope you found this month’s discussion interesting. As always, if you have any questions or comments on this topic, please don’t hesitate to contact me, but in the meantime stay safe, and I look forward to seeing you all next month.
For the big picture, including all the data, watch the full video above.
Matthew Gardner is the Chief Economist of Windermere Real Estate, the second largest regional real estate company in the country.