Fannie Mae Home Purchase Sentiment Index continues slide in December

Dive Brief:

  • Government-backed lender Fannie Mae's consumer sentiment index for housing slid for the fifth-consecutive month in December, dropping another 0.5 points to 80.7 points.

  • A wider breakdown of the index produced a mixed picture, with the net share of consumers expecting mortgage rates to drop over the next 12 months falling four percentage points.

  • However, the share of consumers who say it is a good time to buy a house edged up two percentage points, and the net share of consumers reporting confidence in not losing their jobs increased four percentage points.

Dive Insight:

Fannie Mae Chief Economist Doug Duncan noted that despite a post-election bump in general consumer confidence, the rapid increase in mortgage rate expectations has dampened home purchase sentiment in the near-term.

It comes as expected growth in the housing market could be somewhat tempered in the wake of mortgage rate rises, which have risen about 50-basis points since the Nov. 8 general election and made homes less affordable, a recent Black Knight Financial Services report highlighted.

There are also concerns that a decision by the Federal Reserve to raise interest rates by 25 basis points last month could further crimp home buying activity. Another hike in benchmark interest rates may impact the volume of existing homeowners looking to qualify for or refinance a mortgage and raise borrowing costs for homebuilders.

Mortgage rate increases and the lingering effects of housing shortages were linked to the recent 2.5% drop in pending homes sales in November compared to the month prior, according to a National Association of Realtors report last month.

Still, a supply shortage continues to support high prices and a recent report by Zillow found that home values shot up 6.5% to $192,500 in November, their fastest annual pace since 2006.

Filed Under: Residential Building Economy
Top image credit: Mark Moz