Survey Says: Expect Low Rates to Remain

Funny what several dozen downticks in interest rates will do consumers' perceptions of the mortgage market.  Fannie Mae said today that its Home Purchase Sentiment Index, based on selected responses to its National Housing Survey (NHS) set its second consecutive record high in August.  The Index rose 0.1 point to 93.8 and is up by 5.8 points compared to August 2018.

However, five of the six components that make up the survey were either flat or moved lower. The increase in the index was due solely to an 11-point increase in the net positive responses as to whether mortgage rates will go down over the next year.  The net number remains negative - at -17 percent - but it has risen from -52 percent since August 2018.

Fannie Mae's chief economist Doug Duncan said, "Growing expectations that mortgage rates will remain flat or decline are reflected in the HPSI's latest reading, which is now at a survey high even though other indicators of economic and housing market sentiment are flat to negative. Unfortunately, much of the lower interest rate environment can be attributed to global economic uncertainties, which appear to have dampened consumer sentiment regarding the direction of the economy. We do expect housing market activity to remain relatively stable, and the favorable rate environment should continue supporting increased refinance activity."

Indeed, net positive responses to the questions of whether it is a good time buy and whether it is a good time to sell were both down from the previous month.  The buy response lost 1 point and the sell response 4 points.  They are now at nets of 25 percent and 40 percent, respectively, but they remain 4 points and 2 points higher than a year earlier.

The net share of those who say home prices will go up over the next 12 months decreased 1 percentage point to 36 percent and is down 2 percentage points from the same time last year.  While not a component of the HPSI, those who expect home prices to rise expect average appreciation of 2.4 percent over the next year.  This is down from a 2.7 percent gain in the prior survey.  

Attitudes about job security got a little wobbly. The net share of Americans who say they are not concerned about losing their job over the next 12 months decreased 4 percentage points from July and is down 3 percentage points from the same time last year.  Still, a net of 77 percent of respondents remain confident that their jobs are safe.

The last component, those who say their household income is significantly higher than it was 12 months ago, was unchanged at a net of 21 percent, down 1 percentage point from the same time last year.

The NHS, from which the HPSI is constructed, is conducted monthly by telephone among 1,000 consumers, both homeowners and renters.  In addition to the six questions that form the framework of the index, respondents are asked questions about the economy, personal finances, attitudes about getting a mortgage, and questions to track attitudinal shifts.