Recovery Across the Housing Market Will Likely Be a Gradual, Long-Term Climb

Pete Bakel, Washington, DC – Consumer sentiment regarding the housing market continues its modestly positive trend, according to results from Fannie Mae’s August 2012 National Housing Survey. Supported by the expectation that home prices will rise in the next year and more saying it is a good time to sell, Americans have maintained a cautious but improving view of the housing market and homeownership. However, their stalling household financial expectations and declining economic optimism will likely mean the rate at which the housing market recovers will remain tempered.

“Consumer attitudes toward the housing market remain modestly positive, despite signs of increased concern over the direction of the economy,” said Doug Duncan, senior vice president and chief economist of Fannie Mae. “While the latest results showed a pickup in the share of consumers expecting mortgage rates to rise, reflecting the uptrend of long-term interest rates since mid-July, that may soon change. Friday’s disappointing jobs report underpins the gradual nature of this year’s housing recovery and supports our view that the muted economic recovery is still subject to downside risk and that additional Fed easing will soon be forthcoming.”

Survey respondents expect home prices to increase 1.6 percent in the next year, on average, down slightly from the high of 2.0 percent seen in the June results. The number of respondents who say home prices will decline totaled 11 percent, the lowest level since the survey began in June 2010. Eighteen percent say now is a good time to sell, marking the highest level since the survey’s inception. Regarding to mortgage rates, 40 percent of those surveyed expect a rise in the next 12 months, an increase of 4 percentage points over July.

Meanwhile, the survey showed increasing consumer pessimism about the direction of the overall economy. The number of respondents who believe the economy is headed in the wrong direction ticked up 2 percentage points to 60 percent, the third consecutive rise to the highest reading since January. Those who expect their financial situation to worsen dipped to 13 percent while those expecting their situation to remain the same increased modestly to 41 percent.

SURVEY HIGHLIGHTS

Homeownership and Renting

• Average home price change expectation is 1.6 percent, largely consistent with last month and down from a June high of 2.0 percent.
• Eleven percent of those surveyed say home prices will go down in the next year, holding steady at the lowest level since the survey’s inception in June 2010.
• At 40 percent, the percentage of respondents who say mortgage rates will go up in the next 12 months has increased by 4 percentage points since July.
• Eighteen percent of respondents say it is a good time to sell, the highest level since the survey’s inception.
• The percentage of respondents who say it is a good time to buy has remained steady at 73 percent.
• Forty-four percent of those surveyed say home rental prices will go up in the next year, a decrease of 3 percentage points, while 5 percent expect them to go down.
• The average rental price change expectation decreased 0.7 percent from last month to 3.2 percent, the lowest level since January 2012.
• The percentage of respondents who say they would buy if they were going to move increased slightly to 67 percent, while 28 percent would rent.

The Economy and Household Finances

• Consumer optimism continues to wane, with 33 percent saying the economy is on the right track, a slight decrease from last month and 5 percentage points lower than the May 2012 peak.
• The percentage of respondents who expect their personal financial situation to get worse fell slightly to 13 percent, while those expecting their personal financial situation to stay the same increased slightly to 41 percent.
• The share of respondents who say their household income is significantly higher than it was 12 months ago remained steady at 20 percent, while those who say it is significantly lower increased slightly to 16 percent.
• Fifty-six percent of those surveyed say their household expenses are about the same as they were a year ago, a slight decrease over July.

The most detailed consumer attitudinal survey of its kind, the Fannie Mae National Housing Survey polled 1,002 Americans via live telephone interview to assess their attitudes toward owning and renting a home, mortgage rates, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts (findings are compared to the same survey conducted monthly beginning June 2010). Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future.

For detailed findings from the August 2012 survey, as well as a podcast providing an audio synopsis of the survey results and technical notes on survey methodology and questions asked of respondents associated with each monthly indicator, please visit the Fannie Mae Monthly National Housing Survey site. Also available on the site are quarterly survey results, which provide a detailed assessment of combined data results from three monthly studies. The August 2012 Fannie Mae National Housing Survey was conducted between August 4, 2012 and August 25, 2012. Interviews were conducted by Penn Schoen Berland, in coordination with Fannie Mae.