Consumer housing confidence rises as buying conditions strengthen
With more consumers believing it’s a great time to buy a home, the Home Purchase Sentiment Index had its best November since the index's release in 2011, according to Fannie Mae.
Half of the six sentiment components increased month-over-month. The 11 percentage-point jump in net share of consumers believing it's a good time to buy represented the largest short-term change. This, at least in part, probably relates to the 7 percentage-point rise in consumers expecting home price growth in the next year. Lastly, those anticipating significant rises in household income went up 2 percentage points.
Year-over-year, the percentage of consumers expecting rates to fall remains dramatically higher. However, on a month-to-month basis, the share of consumers who expect rates to continue falling is dwindling.
"Over the past year, a growing share of consumers say that they expect mortgage rates to remain steady," Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a press release. "While low rates have helped boost housing affordability compared to last year, the HPSI has increased only moderately in that timeframe. This may be due in part to the ongoing challenge of tight housing supply, especially in the starter home market.
"That lean supply means the recent mortgage rate decline — holding payment size constant — allows borrowers to increase bid prices for homes. As a result, home prices are propelled higher, mitigating the benefit of lower borrowing costs for many borrowers. Additionally, a rising savings rate suggests that consumers could be growing more financially conservative. Looking ahead, we continue to expect a steady but modest pace of growth in home purchase activity."