Housing Market Optimism Tempered by Shutdown

Fannie Mae said today that consumer responses to its monthly National Housing Survey may have been tempered in September by growing concern about Congress's fiscal policy debate.  While consumers continue to be generally upbeat toward the housing market, their attitudes appear to have plateaued or even decreased over the last three months.

"Our September National Housing Survey results show that the improvements in consumer housing attitudes witnessed in recent months softened ahead of the government shutdown," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Americans' awareness of policy uncertainty leading up to the October 1st shutdown and the pending debt ceiling debate appears to have grown as indicated by an apparent cautionary holding pattern in overall consumer housing and personal finance sentiment."

How and when the policy issues are handled could impact consumer attitudes over the next few months, Duncan said.  The gap between people who think the economy is on the right track rose from 37 percent to 39 percent from August to September with the wrong track opinion declining by those same two points to 55 percent.  This narrowing gap, Duncan said, "Could widen, depending on the outcome of the debt ceiling negotiations as the Treasury expects that the extraordinary measures to extend the nation's borrowing authority will be exhausted by October 17. For example, during the contentious 2011 debt ceiling debate and the resulting S&P downgrade of the U.S. government debt, our survey showed that the right track-wrong track spread widened to a survey record of 64 percentage points."  

The percentage of survey respondents who expect home prices to increase further over the next 12 months decreased from 55 percent in August to 52 percent in the current survey and the average expectation for an increase was down from 3.4 percent to 3.1 percent.  However, mortgage rates are anticipated to increase by a survey high 63 percent of respondents, up from 60 percent the previous month.

Seventy-two percent of survey respondents say it is a good time to buy a house, up 1 percentage point, while 38 percent view it as a good time to sell.  The latter is an increase of 2 percentage points.

Respondents however appear to feel that pressures in the rental market have eased.  Fifty-two percent now expect that rents will increase over the next 12 months compared to 53 percent in August and about 55 percent in July.  The average increase in rents expected has also decreased steadily since June when it peaked at around 4.3 percent.  In September the average expectation was for increases of around 3.4 percent.

The share of respondents who said they would buy if they were going to move increased to a survey high of 69 percent and the share of those who think it would be easy for them to do so increased slightly to 47 percent.

The percentage of respondents who expect their financial situation to get worse over the next 12 months blipped up 4 percentage points in September to 16 percent but the remaining 84 percent of respondents are equally divided between those who expect an improvement and those who anticipate no change.  The share of consumers who say their household income is significantly higher than it was 12 months ago fell by one percentage point from August, to 22 percent and those who says their expenses are significantly higher rose from 32 percent to 33.

Fannie Mae conducts its National Housing Survey by phone each month among a panel of about 1,000 respondents including both homeowners and renters.  The panel is asked more than 100 questions to assess their   attitudes toward owning and renting a home, housing and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence.