Fannie Mae

11 September 2016

Home Purchase Sentiment Index Retreats Slightly, but Gradual Upward Trend Continues

HPSI Points to Continued, Moderate Strengthening of Housing

The Fannie Mae Home Purchase Sentiment Index® (HPSI) fell 1.5 points to 85.0 in August but continued its gradual climb upward from the same period last year. Four of the six HPSI components decreased during the month, most notably the share of consumers who expect home prices to go up in the next 12 months and the share who say now is a good time to sell a home – decreasing 6 and 5 percentage points in August, respectively. Additionally, more consumers reported a positive employment outlook from the previous month, up 4 percentage points in August, and those reporting significantly higher household income fell 1 percentage point. Overall, consumer housing sentiment remains positive and bodes well for continued growth in housing activity.

“Consumers have a fairly optimistic 12-month outlook on housing at the end of the summer home-buying season, supported by increased job confidence and more favorable expectations regarding their personal financial situations compared with this time last year,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The return to a slight upward trend in the HPSI during the spring and summer is, thus far, in line with our forecast, which calls for 4 percent growth in home sales in 2016 to the best level since 2006 and continued improvement for 2017.”

1st Anniversary Edition – Home Purchase Sentiment Index
The Home Purchase Sentiment Index (HPSI) was first released publicly in September 2015. On its first anniversary, we take a look back at the movements of the HPSI over the five years we have calculated it based on data from the National Housing Survey®. The HPSI trended strongly upward from March 2011 until mid-2013. Home sales also strengthened sizably in 2012 and 2013. As the HPSI dipped lower in response to the “Taper Tantrum” in mid-2013, home sales fell in 2014 for the first time in four years. The HPSI fully recovered its pre-tantrum levels by the fall of 2014 and has since been on its gradual upward trend, reaching a record high in July 2016 before pulling back slightly in August. Its recent trend signals that home sales will likely advance through next year.

HOME PURCHASE SENTIMENT INDEX – COMPONENT HIGHLIGHTS

Fannie Mae’s August 2016 Home Purchase Sentiment Index (HPSI) decreased 1.5 points in August to 85.0, after an all-time high in July. Overall, the HPSI is up 4.2 points since this time last year.

  • Increasing for the third consecutive month, the net share of Americans who say it is a good time to buy a house rose by 1 percentage point to 34%.
  • The net percentage of those who say it is a good time to sell fell 5 percentage points from an all-time high in July to 15%.
  • The net share of Americans who say that home prices will go up fell 6 percentage points from last month to 35%.
  • The net share of those who say mortgage rates will go down over the next year fell 2 percentage points to -38%, after increasing for the past three months.
  • The net share of Americans who say they are not concerned with losing their job rose 4 percentage points to 73%.
  • The net share of Americans who say their household income is significantly higher than it was 12 months ago fell 1 percentage point to 10%, stabilizing after June’s steep fall.

ABOUT FANNIE MAE’S HOME PURCHASE SENTIMENT INDEX

The Home Purchase Sentiment Index (HPSI) distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey® (NHS) into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

ABOUT FANNIE MAE’S NATIONAL HOUSING SURVEY

The most detailed consumer attitudinal survey of its kind, Fannie Mae’s National Housing Survey (NHS) polled 1,000 Americans via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). To reflect the growing share of households with a cell phone but no landline, the National Housing Survey has increased its cell phone dialing rate to 60 percent as of October 2014. For more information, please see the Technical Notes. Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future. The August 2016 National Housing Survey was conducted between August 1, 2016 and August 18, 2016. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by Penn Schoen Berland, in coordination with Fannie Mae.

DETAILED HPSI & NHS FINDINGS

For detailed findings from the August 2016 Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Consumer Attitude Measures page on fanniemae.com. Also available on the site are in-depth topic analyses, which provide a detailed assessment of combined data results from three monthly studies of NHS results.