Consumers Gloomiest in a Decade, But Still A Great Time to Sell

The chief finding from Fannie Mae's November National Housing Survey (NHS) was an increase in consumer pessimism. The company says respondents to the right track/wrong track question expressed the most downbeat attitude in 10 years. Seventy percent of those expressing an opinion about the direction of the economy said it was on the wrong track, a 5 point month-over-month increase. Only 22 percent chose the opposite answer.

The right/wrong track question is not among the six that are used to construct Fannie Mae's Home Purchase Sentiment Index (HPSI), but four of the six components that are decreased during the month. This brought the index down 0.8 points from October to 74.7, marking a 5.3-point year-over-year decline.

Consumers still overwhelmingly think it is a good time to sell, with 74 percent making that claim although the net positive answers declined by 7 points to 53 percent. This is still 27 points higher than the net in November 2020.

In contrast, consumer sentiment regarding buying is still in negative territory with only 29 percent viewing it as a good time to buy versus 64 percent who say it is not. The net positive of --35 percent is unchanged from the prior month but 57 percent lower than a year ago.

The percentage of respondents who say mortgage rates will go down in the next 12 months was unchanged at 5 percent, while the percentage who expect mortgage rates to go up increased from 55 percent to 58 percent. Thirty-two percent expect no change. This brought the net share expecting lower rates down 3 points from October to a negative 53 percent.

Despite the downbeat attitude toward the economy, fewer consumers appear worried about their jobs. The net of those who concerned about losing theirs shifted lower by 1 point from October but was up 16 percent from the same point last year.

The same patterns prevailed for those reporting higher annual income. It slipped 1 point on a month-over-month basis but at 10 percent is up 4 points from last year.

The one question where the net increased from October was about higher home prices. Forty-five percent expect those prices to continue to rise for a net of 24 percent, a 7-point gain.

"The HPSI experienced some shuffling among its underlying components in November, but the overall index once again stayed relatively flat," said Mark Palim, Fannie Mae Vice President and Deputy Chief Economist. "While consumers expressed even greater concern regarding the direction of the economy, with the share of respondents expressing pessimism hitting a 10-year high, overall housing sentiment remained stable. Consumers' concerns for their personal job situation have eased and respondents also reported feeling better about their income level compared to a year ago, with both of those components now nearing their pre-COVID levels."

Palim continued: "Even though consumers are reporting broader macroeconomic concerns - with much of it likely tied to inflation - so far any negative sentiment tied to the economy has not translated into a meaningful decrease in actual purchase mortgage demand. According to this month's survey, an even greater share of consumers (particularly those with low and moderate incomes) expects mortgage rates to go up in the next 12 months, which may be a signal that some households plan to pull-forward their home purchase plans despite growing economic apprehension."

The National Housing Survey 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 are 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.