Home Price Expectations Continue to Decline

Responses to the most recent National Housing Survey conducted by Fannie Mae show Americans continue to be cautious in their appraisals of the housing recovery and of their own financial outlook.  Respondents appear to have recovered a little of their optimism about the overall economy after October's 12 percentage point drop in the numbers who thought the country was on the right track.  The frequency of that response increased by 5 percentage points to 32 percent but is still well below September's level.

The National Housing Survey is conducted each month by phone among a panel of 1,000 households, both homeowners and renters.  Each is asked about 100 questions to assess their attitude toward home ownership, renting, the economy, and their own personal finances.  The current survey was conducted over the period of November 1-20.

Consumers' home price expectations have declined steadily since last summer.  Forty-five percent of respondents now expect home prices to continue to rise compared to 57 percent who held such expectations in June.  Among those who expect further increases the average increase expected dipped to 2.5 percent from 2.9 percent in September and 3.6 percent in June. 

The share of those who expect mortgage rates to climb over the next 12 months remains elevated at 59 percent after rising rapidly in June from the low 40 percent rage.  Only 3 percent of respondents expect further lowering of rates. 

The share who say it is a good time to buy a house continued to drop, falling to a survey low of 64 percent.  The percentage who consider this a good time to sell has varied little since May and is currently at 37 percent.

"We continue to see caution as the defining feature of Americans' attitudes toward the economy and their personal financial situation. In this environment, the housing recovery is likely to improve, but only at a gradual pace," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Our November National Housing Survey results show a loss of momentum in expectations for home prices and personal finances. Also, the majority of consumers expecting higher mortgage rates implies a slowing of housing market momentum. As the economy continues to improve and household balance sheets for most Americans are slow to repair, we continue to see the transition to a full housing recovery as a slow process. Upcoming fiscal policy discussions and labor market developments may also lead to some bumps along the way."

Fifty percent of those surveyed said home rental prices will go up in the next 12 months, decreasing two percentage points from last month but the average 12-month rental price change expectation dropped to an all-time survey low of 2.8 percent.  The average expected increase was 4.6 percent in June.

Fifty percent of respondents said it would be easy for them to get a home mortgage today, an increase of 4 percentage points from last month.    The share of respondents who said they would buy if they were going to move decreased slightly, to 68 percent.

Respondent's expectations about their personal financial situation did not change much; those who expect it to worsen over the next 12 months held steady at 22 percent while those expecting an increase or no change were fairly evenly divided at 39 and 38 percent.   The share of respondents who say their household income is significantly lower than it was 12 months ago increased slightly to 17 percent.