Fannie Mae

Housing sentiment continues downward trend in Fannie Mae’s October survey

Despite general optimism about the economy, respondents to Fannie Mae's monthly housing survey in October were less likely to consider housing market indicators to be favorable.

The Home Purchase Sentiment Index for the month stood at 85.7, down two points from September despite a yearover-year gain of half a point. The index is based on six components of Fannie Mae's National Housing Survey, including perceptions on whether it is a good time to buy or sell a home, expected changes to home prices and mortgage rates, perceived job security, and recent changes in household income.

The net share of respondents expressing a positive answer was down from the previous month in five of the six components. Year-over-year decreases were posted in half of the components.

Fannie Mae said the index has been steadily trending downward since hitting record high levels in the spring. October's figure is the lowest one in 2018.

The decline in sentiment was driven mostly by pessimism toward home buying conditions. Fifty-five percent said they thought it was a good time to buy, down 3 points from the previous month and 2 points from the previous year. The share considering it a bad time to buy stood at 34 percent, down 1 point from October 2017 but up 2 points from September. The net share of 21 percent considering it a good time to buy a home was the second lowest in the survey's history.

"The further erosion of buying sentiment occurred despite generally positive views of the economy," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Among those who said it's a good time to buy, 30 percent—a record high—cited favorable economic conditions as the reason."

Despite the growing pessimism about buying conditions, 69 percent said they would buy their next home rather than rent – up 3 points from September and 2 points from October 2017. Twenty-six percent said they would rent, down 4 points from the previous year but a year-overyear gain of 1 point.

More respondents said they thought getting a mortgage would be difficult, with 45 percent expressing this opinion. This was up from 41 percent in September and 39 percent in October 2017. The share of respondents who thought it would be easy to get a mortgage fell from 59 percent in the previous year and 56 percent in the previous month to 52 percent.

Sixty-one percent of respondents said they think mortgage rates will increase in the next 12 months, up 1 point from the previous month and 11 points from the previous year. Just 4 percent said they expect rates to drop, down 2 points from September and unchanged from October 2017.

Fifty-seven percent of respondents said they believe home rental prices will increase in the next 12 months, down 2 points from the previous month and 1 point from the previous year. Four percent said they expect rental prices to drop, up from 2 percent in September and 3 percent in October 2017.

On average, respondents said they think rental prices will increase by 4.3 percent in the next 12 months. This was down from 4.5 percent in the previous month and 4.4 percent in the previous year.

After a record high percentage of respondents—68 percent—said they thought the housing market is favorable to sellers in the spring, the net share expressing this opinion has fallen steadily. Sixty-two percent of respondents in the October survey said they think it's a good time to sell a home, down 2 points from the previous month but a year-over-year gain of 1 point. Twenty-seven percent said they think it's a bad time to sell a home, up 1 point from September but down 4 points from October 2017.

Forty-six percent of respondents said they think home prices will go up in the next 12 months, down 3 points from September and 2 points from October 2017. The share expecting a decrease in home prices stood at 9 percent, up 1 point from the previous year but down 1 point from the previous month.

The average respondent said they think home prices will increase by 2.6 percent in the next 12 months. This was unchanged from September and up slightly from 2.3 percent in October 2017.

Eighty-nine percent said they are unconcerned about losing their job in the next 12 months, an increase of 4 points from the previous year but unchanged from the previous month. Eleven percent said they are worried about potential unemployment, up 1 point from the previous month but a year-over-year drop of 4 points.

Twenty-nine percent said their household income is significantly higher than it was 12 months ago, up from 28 percent in September and 25 percent in October 2017. Ten percent said their income is