Consumers More Upbeat on Housing than Broader Economy

Americans are feeling much better about housing than they do about the economy as a whole judging by their responses to the February National Housing Survey.  The survey, conducted monthly by Fannie Mae found that both homeowners and renters expect home prices to rise and are increasingly disposed toward buying a home rather than renting one but are changing little in their expectations about the economy or their personal finances.

The percentage of respondents who expect home prices to go up over the next 12 months jumped from 41 percent in the January survey to 48 percent and those who expect no change in prices fell from 45 percent to 39 percent.  Only 10 percent expect further price declines, a number that has remained flat since last summer.

Those who expect prices to rise are looking for larger increases - an average of 2.9 percent over the next 12 months.  This is an uptick of 0.5 percent from responses last month.

Only seven percent of respondents expect interest rates to decline further, a number that has not changed since December, while 45 percent expect rates to increase over the next 12 months, an increase of 4 percentage points from January and the highest level since August 2011.

Twenty-five percent of respondents say it is a good time to sell a house, the highest level since the survey's inception in June 2010 and 73 percent think it is a good time to buy, up from 69 percent.  Sixty-seven percent say they would buy if they were going to move, 2 percentage points more than in January.

Half of respondents expect rentals to go up over the next 12 months, unchanged from January while expectations for the amount of the rent hikes rose to 3.9 percent from 3.7 percent.

When asked about the economy or their own personal finances survey respondents appear in a holding pattern.  While 38 percent say the economy is on the right track this is well below the peak of 45 percent in November and has been virtually unchanged over the last three surveys.

The percentage who expect their personal financial situation to get better over the next 12 months fell by 2 percentage points to 41 percent and fewer (21 percent compared to 23 percent) say their household income is significantly higher than it was 12 months ago, a 2 percentage point decrease.  However fewer (31 percent) report significantly higher household expenses over the same period, a 7 percentage point decrease and the lowest level since June 2010.

 "Despite fiscal headwinds and political uncertainty, consumer sentiment toward housing is robust and continues to gather strength," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "We expect home prices to firm further amid a durable housing recovery, gradually reducing the population of underwater borrowers and helping to boost the share of consumers who say that now is a good time to sell."

"Since reaching its trough last September, the share of consumers expecting mortgage rates to rise has trended up," continued Duncan. "However, despite historically low mortgage rates, nearly half of borrowers have never refinanced their mortgage. Combined with the scheduled year-end HARP deadline, rising rate expectations should prompt some borrowers to refinance soon to take advantage of more favorable mortgage terms and add to their disposable income, helping to offset ongoing fiscal drag." 

The Fannie Mae National Housing Survey collected data via phone from 1,008 Americans, both homeowners and renters, to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence.