The housing market is unseasonably weak due to consumers' worries about an economic slowdown and a decline in overall household income, according to a Fannie Mae survey.
Fannie Mae's national survey of consumer attitudes for May polled 1,000 Americans and revealed that 57% believe the economy is moving in the wrong direction, while only 38% are optimistic about the current economic track.
Furthermore, the share of survey respondents whose total household income has "significantly increased" fell four percentage points from April to 21%. Additionally, just 42% of respondents in the May survey expect their personal financial situation to get better within the next year, down two basis points from the month before.
"Consumers' lukewarm income expectations and reticence about the economy seem to be holding back housing demand," said Doug Duncan, senior vice president and chief economist at Fannie Mae, in a press release. "This year's spring and summer home buying season has gotten off to a slow start, even as mortgage rates have trended lower over the past two months."
The survey also showed that some consumers have grown pessimistic about the value of their properties.
For example, 48% think home prices are going to rise in the next 12 months, but this figure has fallen seven percentage points from a year ago. Also, the average 12-month home price growth expectation is at 2.9%, which is down one basis point compared to May 2013.
Despite the gloomier home price expectations, 68% of consumers think it is a good time to buy a house. Still, those who say it is a good time to sell a house increased to 43%, a new survey high.
More respondents said they thought it's easy to get a mortgage than did last month, as this survey question showed a four percentage point (49%) increase.
"While recent housing activity suggests that the worse of the housing slump may be behind us, this caution among consumers supports our expectation that the rebound in home sales will likely be too modest to pull sales for all of 2014 ahead of last year," Duncan says.