Buyers and Sellers Both More Upbeat in 2021

Consumers expressed more positive
sentiments toward the housing market as 2021 arrived, sending Fannie
Mae’s Home Purchase Sentiment Index (HPSI) a bit higher. The most significant
gains came from increased optimism about the climate for selling a home.

The index increased by 3.7 points to
77.7 in January, erasing at least a portion of its 6-point loss in December. Fifty-seven
percent of consumers contacted by the monthly National Housing Survey said they
felt it was a good time to sell a home, up 7 points from December, while those
who viewed it as a bad time dropped 9 points to 33 percent. This left the net
positive answers at 24 percent, a 16-point month-over-month increase and 21
points higher than in January of last year.

Positive feelings about buying a
home were unchanged from December at 52 percent, but negative responses dipped
from 39 to 37 percent, moving the net positives up 2 points to 15 percent. This,
however, is 14 points below the level in January 2020.

“The HPSI experienced a modest
uptick in January, reversing much of December’s decline,” said Doug Duncan,
Fannie Mae Senior Vice President and Chief Economist. “Interestingly,
lower-income and renter groups were more optimistic this past month across
nearly all of the sentiment index’s components. We will pay close attention to
see if this newfound optimism develops into a trend, which could indicate
either that some demographics who have been more negatively impacted by the
pandemic may be starting to feel the economic recovery or that this is a
response to the additional stimulus enacted in December.”

“Overall, the index’s monthly increase was driven largely by a substantial jump
in the share of consumers reporting that it’s a good time to sell a home, with
many citing favorable mortgage rates, high home prices, and low housing
inventory as their primary rationale. Among owners and higher income groups,
however, the other five components of the index remained relatively flat or
slightly negative, suggesting to us that some consumers are waiting to gauge
the effectiveness of any new fiscal policies and vaccination distribution
programs on both housing and the larger economy.”

The percentage of respondents who say home prices will go up in the next 12
months was unchanged at 41 percent while those who expect a price decline grew
from 16 percent to 17 percent. Thirty-four percent expect no change in prices,
identical to the result in December. Thus, the net share of Americans who say
home prices will go up decreased 1 percentage point month-over-month and is 17
percent below year-ago levels.

The percentage of respondents who expect
mortgage rates will decline over the next 12 months moved 1 point higher to 9
percent while 45 percent say rates will increase, 2 points more than the prior
month. Those who expect no change declined from 39 to 37 percent. This left the
net at a negative 36 percent compared to a negative 26 percent the previous January.

The percentage of respondents who
say they are not concerned about losing their job in the next 12 months
remained unchanged at 75 percent and the net who said they were not concerned
increased 1 point to 51 percent. That is down 21 points year-over-year.

The share of respondents reporting
significantly higher household income over the past year increased from 20 to
21 percent while reports of significant declines were down 4 points to 14
percent. Little change was reported by two-thirds of respondents. The net share
of those who say their household income is significantly higher than it was 12
months ago increased 5 percentage points month-over-month but was down 9 points
on an annual basis.

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.

Source: mortgagenewsdaily.com

Fannie Mae reports rising confidence in housing market

Following two months of steady declines, Fannie Mae’s Home Purchase Sentiment Index (HPSI), a composite index designed to track the housing market and consumer confidence to sell or buy a home, rose in January.

The HSPI rose 3.7 points last month to 77.7. Though it’s undoubtedly a positive sign, the HPSI has yet to recover to pre-pandemic levels and is still down 15.3 points year over year.

Doug Duncan, Fannie Mae’s chief economist, noted a slight chasm has formed in confidence among lower and higher- income groups based on recent stimulus and fiscal policies.

According to Duncan, this newfound optimism in lower-income borrowers and renters could indicate those who have been more negatively impacted by the pandemic may be starting to feel the economic recovery.

“Among homeowners in higher income groups, however, the other five components of the index remained relatively flat or slightly negative, suggesting to us that some consumers are waiting to gauge the effectiveness of any new fiscal policies and vaccination distribution programs on both housing and the larger economy,” Duncan said.


Making housing more affordable by bridging the affordable supply gap

In the last few years, the number of existing single-family homes for sale has decreased. But home prices have increased. To make homeownership a possibility for everyone, there needs to be a higher supply of affordable homes.

Presented by: Fannie Mae

Overall, January’s housing market confidence jump was largely driven by renewed optimism for prospective home sellers, after December’s increasing home prices and tight inventory left homeowners weary that 2020’s record sales may not roll in to the new year. However, the percentage of respondents who say it is a good time to sell a home increased from 50% to 57% in January, while those who believe it is a good time to buy remained unchanged at 52%.

Even though buying sentiment stood idle in the first month of 2021, mortgage applications jumped 8.15% from the week ending Jan. 29, breaking a two-week streak of decreases, according to the Mortgage Bankers Association.

And borrowers are still relatively unsure of how long elevated home prices will hold. The HPSI reported 41% of respondents expect home prices will go up in the next 12 months – unchanged from the month prior – while those who believe it will go down increased from 16% to 17%.

But even if those prices do rise, borrowers can still save on the record low rates the industry has become accustomed to. The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 8% to 9%, while the percentage who expect mortgage rates to go up increased from 43% to 45%.

Though economists are fairly certain all signs indicate to rising mortgage rates, experts said it won’t be a sudden jerk reaction but rather a slow build that will force its way over 3% later in the year. Regardless, LO’s made insane money in 2020 thanks to record low rates, with the jury still out on whether they can swing it again in 2021 if refi’s begin to fall with rising rates.

But rising rates are a sign of a recovering economy, and though that recovery may look slow, the housing market is showing signs its already occurring.

The percentage of respondents who say they are not concerned about losing their job in the next 12 months remained unchanged at 75%, while those who are concerned fell from 25% to 24%. And the percentage of respondents who say their household income is significantly higher than it was 12 months ago increased from 20% to 21%, while the percentage who say theirs is significantly lower decreased from 18% to 14%.

January’s unemployment numbers weren’t overly impressive to economists, with the unemployment situation virtually unchanged for the month.

“The number of people on temporary layoff fell slightly in January, while the number of permanent job losers rose, a troubling sign. On the other hand, the number of people working part time but who would prefer full time employment also fell slightly, a positive indicator of labor demand,” Duncan said.

Source: housingwire.com