Tax Cut Uncertainty Dampened Consumer Attitudes in December

Americans continued to have ambivalent views about the current virtues of both home buying and home selling in December.  Consumers, responding to Fannie Mae's monthly National Housing Survey (NHS), expressed declining confidence in whether it is a good time to buy, and no corresponding increase in whether it might be a good time to sell.  

All in all, respondents appeared cautioned in their attitudes toward both the economy and the housing market as 2017 neared an end.  A decline in four of the six components of Fannie Mae's Home Purchase Sentiment Index (HPSI) brought it down 2.0 points to 85.8, reversing most of the 2.6-point increase in November. The HPSI is up 5.1 points compared with its December 2016 counterpart. Fannie Mae attributed the decline, in part, to uncertainty about the tax cut proposals that were under discussion in Congress at that time the survey was conducted.

The percentage of respondents who said now is a good time to buy a home decreased 5 percentage points compared to November to a net of 24 percent, and is down 8 percentage points compared to the same period last year. The net share who reported it is a good time to sell shot up earlier in 2017 and is now 21 points higher than the same time in 2016, but was unchanged in December from the November net of 34 percent.

The net share of respondents who expect home prices to rise over the upcoming 12 months declined from 46 percent to 44 percent, and among those expecting further appreciation, the average expectation for an annual gain (not an index component) declined from 3.7 percent to 3.3 percent.   

Americans also expressed a weakened sense of job security.  Those who say they are not concerned about losing their job decreased 6 percentage points, but was still the majority sentiment at a net of 68 percent.  The net share of consumers who said mortgage rates will go down over the next 12 months fell 1 percentage point in December, to a negative net of 52 percent. Finally, the net share reporting that their income is significantly higher than it was 12 months ago rose 2 percentage points to 16 percent. 

"Consumers remained cautious in their housing outlook at the end of 2017, as tax reform discussions continued. In December, mirroring the other major consumer sentiment benchmarks, the HPSI reflected this caution and declined slightly," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Entering 2018, housing affordability remains a persistent challenge, particularly in rental markets, where consumer expectations for price increases over the next 12 months reached a new survey high."

The NHS, from which the HPSI is constructed, is conducted monthly by telephone among 1,000 consumers, both homeowners and renters.  Respondents are asked more than 100 questions to track attitudinal shifts.  The Home Purchase Sentiment Index (HPSI) distills information about consumers' home purchase sentiment from six of those questions into a single number. The December 2017 National Housing Survey was conducted between December 1, 2017 and December 18, 2017.