Housing Enthusiasm Ebbed After Last Month's All-Time Highs -Fannie Survey

Fannie Mae blamed diminished confidence in both buying and selling a home for a 3.1 percentage point drop in its Home Purchase Sentiment Index (HPSI) last month.  The Index fell, after tying the all-time high of 88.3 in September, to 85.2 in October.  Net positive responses to four of the six components of the HPSI, which is based on the National Housing Survey (NHS), declined.

The net share of respondents who said it is currently a good time to sell a home decreased by 8 points from its level in September.  The resulting 30 percent net share was still 11 points higher than a year earlier.  The net share of those who indicated it is a good time to buy a home was down 6 points to 22 percent, wiping out much of its 10-point increase in September.

Americans also expressed a decreased sense of job security, with the net share who say they are not concerned about losing their job decreasing 5 percentage points, although confidence in job security remains high at a net of 70 percent. The share of consumers who reported that their income is significantly higher than it was 12 months ago fell by 1 percentage point to 14 percent, while the net share of those who believe mortgage rates will go down increased 1 percentage point. Finally, the net share who said home prices will go up in the next 12 months remained flat in October at a net of 40 percent.

"The modest decrease in October's Home Purchase Sentiment Index is driven in large part by decreases in favorable views of the current home-buying and home-selling climates, a shift we expect at this time of year moving out of the summer home-buying season," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Indicators of broader economic and personal financial sentiment remain relatively steady. Overall, these results are consistent with our view that the housing market will continue its slow, upward grind through 2018."

The HPSI distills information about consumers' home purchase sentiment from six questions contained in Fannie Mae's NHS into a single number. The company says the HPSI reflects current views and forward-looking expectations of housing market conditions.  The NHS is conducted monthly by telephone among 1,000 consumers, both homeowners and renters.  Respondents are asked more than 100 questions used to track attitudinal shifts.