Fannie Mae reports that the November Home Purchase Sentiment Index fell for the fourth consecutive month. The GSE’s report indicates that the index declined 0.5 points to 81.2 with four of the components that make up the Home Purchase Sentiment dropping.
“The November Home Purchase Sentiment Index outcome is difficult to interpret as the data collection period occurred across the Presidential election timeline,” says Doug Duncan, SVP and Chief Economist at Fannie Mae. “We caution readers against drawing conclusions about sustainable changes in consumer sentiment so soon after the election. For example, low mortgage rates have been the primary driver of positive attitudes toward the home buying and selling climate throughout the recovery. However, if mortgage rates continue their recent rise, we may see a dampening in home purchase attitudes.”
Fannie Mae found that the index’s component “net share of Americans who say it is a good time to buy a house” decreased 1 percentage point to 30 percent as well as the component “net percentage of those who say it is a good time to sell” dropped 6 percentage points to 13 percent. In contrast, the GSE reports that the component “net share of Americans who think it is a bad time to sell” grew by 2 percentage points to 38 percent.
“There are clear predecessors for rapid market changes that ultimately dissipated, which urges caution in the interpretation of stability in short-term rate changes,” says Duncan. “Most recently was the very temporary market reaction to the Brexit and, earlier, the 'Taper Tantrum,' and in both instances the rate regime returned to roughly its prior position. The drivers are somewhat different in this instance but nonetheless suggest modesty in drawing near-term conclusions.”
The index also found that the component “net share of Americans who say that home prices will go up” increased 4 percentage points to hit 35 percent. Fannie Mae reports that this increase reverses the 3-month downward trend for this metric. Additionally, the report notes that the index component “net share of those who say mortgage rates will go down over the next twelve months” decreased by 6 percentage points to -51 percent.
“All that said, we do not see in the November HPSI results a fundamental departure from a flattening of housing activity relative to prior periods,” says Duncan. “This is consistent with our corporate forecast of a modest growth in the 12 months ahead.”