Consumers Optimistic About the Economy, Less So About Housing

Although the American consumer is feeling pretty good about the national economy these days, they are less inclined to have the same sunny outlook when it comes to the topic of the housing market. According to Fannie Mae’s Home Purchase Sentiment Index (HPSI), consumer attitudes about their job security and household income reached all-time highs since the index’s creation this past August. However, fewer respondents to the survey said that it was a good time to buy a home and, furthermore, fewer respondents said it was a good time to sell. Slightly fewer (1 percent) said they believe home prices will rise in the next year.

Consumer Finances are Good

Overall, American’s feelings about their financial situations are good, so it is surprising that the housing sentiments in the index are so different from other components. 15 percent fewer Americans were concerned about losing their jobs last month, and one percent more respondents (22 percent total) said they are making more money now than they were a year ago. However, that job security and financial comfort is not leading consumers to feel more like buying a home.

“Consumers are attuned to the divergence between the slowing housing market and a strong macro economy,” explained Fannie Mae chief economist Doug Duncan. He added, “After years of robust home price growth outpacing income growth, consumers face significant housing affordability challenges at the low end of the market.”

Why the HPSI Matters

Fannie Mae’s HPSI is the most detailed consumer attitudinal survey of its kind and contacts 70 percent of all respondents via cell phone to allow for a prevailing lack of landlines across younger households.

Builders Hoping to Trigger a Boost in Housing Supplies

Although consumer sentiment on housing may not be particularly rosy at the moment, the home-construction sector is still banking on entry-level and first-time buyers will find their “stride” in the housing market as the real estate environment shifts nationally. According to Builder Online, this may lead builders to get more aggressive with pricing, starts, permitting, and “volume strategies” in an effort to make risks taken in terms of land procurement in the past 24 months pay off.

Do you think these HPSI metrics foreshadow trouble for the housing market?



  • Bryan Ellis says:

    While I agree with the basic sentiment that the economy is impressively strong and the housing market may be a bit less strong, it gives me real concern when I see builders trying to drive the market with new construction. Having said that, the fundamentals of the economy do appear quite strong and that relative strength is the primary driver (or inhibitor) of real estate markets. Plus, all of those millenials still living in mom & dad’s basement have to grow up and move out at some point…

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