Cautious consumers stall housing momentum

Dec. 9, 2013 – According to Fannie Mae’s November National Housing Survey results, nearly two-thirds of Americans believe the economy is on the wrong track; and the share expecting their personal finances to worsen during the next year has increased during the past few months to 22 percent.

Meanwhile, consumers’ home price expectations have declined steadily since summer. The share that say prices are going to increase within the next 12 months fell to 45 percent, and the average home price change expectation dipped to 2.5 percent from 2.9 percent.

In addition, the share that expect mortgage rates to climb in the next 12 months has remained at an elevated level since it spiked in June.

“We continue to see caution as the defining feature of Americans’ attitudes toward the economy and their personal financial situation. In this environment, the housing recovery is likely to improve, but only at a gradual pace,” says Doug Duncan, senior vice president and chief economist at Fannie Mae.

If Americans expect mortgage rates to rise, Duncan says, he expects a slowing of housing momentum based on that attitude.

“As the economy continues to improve and household balance sheets for most Americans are slow to repair, we continue to see the transition to a full housing recovery as a slow process,” Duncan adds. “Upcoming fiscal policy discussions and labor market developments may also lead to some bumps along the way.”

Survey highlights

Homeownership and renting

• The share of people who say home prices will go up in the next 12 months fell slightly to 45 percent, and those who say home prices will go down decreased to 9 percent.
• The share of respondents who say mortgage rates will go up in the next 12 months increased by 2 percentage points to 59 percent.
• The share who say it is a good time to buy a house continued to drop, falling to a survey low of 64 percent.
• Fifty percent of those surveyed said home rental prices would go up in the next 12 months, decreasing two percentage points from last month.
• Fifty percent of respondents said it would be easy for them to get a home mortgage today, an increase of 4 percentage points from last month.
• The share of respondents who said they would buy if they were going to move decreased slightly, to 68 percent.

Economy and household finances

• The share of respondents who say the economy is on the right track increased to 32 percent but remains low compared to earlier this year.
• The percentage of respondents who expect their personal financial situation to get worse in the next 12 months held steady at 22 percent.
• The share of respondents who say their household income is significantly lower than it was 12 months ago increased slightly to 17 percent.
• At 33 percent, the share of respondents who say their household expenses are significantly higher than they were 12 months ago fell slightly from last month.

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