Consumer optimism about housing continues to fade: Fannie Mae

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Consumer optimism about purchasing a home continued to fade in July, as low inventory, rising prices and higher interest rates are affecting their market perception, Fannie Mae said.

Its Home Purchase Sentiment Index fell for the second consecutive month, to 86.5 from 90.7 in June and a record high of 92.3 in May. In July 2017, the index was 86.8.

"Home purchase sentiment seems to have reached a plateau, with potential home sellers likely struggling to find a home to buy amid slow supply growth, expectations for rising mortgage rates and significant home price increases," Doug Duncan, Fannie Mae senior vice president and chief economist, said in a press release.

"Survey respondents cite 'high home prices' as the top reason why it is both a good time to sell a home and bad time to buy a home. This suggests a contributing factor to the low supply of existing homes for sale is that current owners are reluctant to trade up in a rising price market. Additionally, the shares of consumers citing favorable mortgage rates as a reason why it's a good time to buy or sell a home both dropped to fresh survey lows."

The net share of consumers that considered July a good time to sell a home fell to 41% from 47% in June (a survey high), while those that considered it a good time to buy fell to 24% from 28% during the same period.

Fewer respondents thought home prices would increase in the next 12 months, 49% compared with 55% one month prior, while 10% said prices would go down, up from 9%. The net share of 39% feeling prices would rise is the first time since December 2016 that it was under 40%.

But respondents remained pessimistic about mortgage rates, with 58% stating they would increase in the next 12 months, unchanged from June. Meanwhile, 6% felt they would decrease, up from 5%.

The HPSI component that measures job security decreased 11 percentage points in July. Even though 82% of respondents said they were not concerned about losing their job in the next 12 months, it was down from 88% in June. At the same time, 17% said they were concerned, up from 12% in June.

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Purchase Home prices Mortgage rates forecast Mortgage rates Fannie Mae