NATNews Blog > June 2016 > Increase in Consumers' Household Income Growth Perceptions Boosts HPSI

    Increase in Consumers' Household Income Growth Perceptions Boosts HPSI

    6/8/2016 8:37:48 AM
    By Jennifer Lucas
     

    Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased 1.6 points to 85.3 in May, reaching a new all-time survey high and rebounding from an 18-month low in March. Three of the six HPSI components increased in May, led by a 7 percentage point increase on net in the share of consumers reporting that their income was significantly higher than it was 12 months ago.
     
    In addition, the net share of consumers who expect that home prices will go up over the next 12 months rose 5 percentage points, followed by a 3 percentage point increase in the net share of consumers who expect mortgage interest rates to go down over the next 12 months. Changes in the HPSI Good Time to Buy, Good Time to Sell, and job security components were minimal in May. The HPSI Good Time to Buy figure fell 1 percentage point on net, reaching an all-time survey low again in May. Slightly more consumers reported concern about losing their job compared to April, but the overall trend has continued to decrease.
     
    “Continued home price appreciation has been squeezing housing affordability, driving a two-year downward trend in the share of consumers who think it’s a good time to buy a home,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The current low mortgage rate environment has helped ease this pressure, and fewer than half of consumers expect rates to go up in the next year. While the May increase in income growth perceptions could provide further support to prospective home buyers as the spring/summer home buying season gains momentum, the effect may be muted by May’s discouraging jobs report.”
     
    Home Purchase Sentiment Index Component Highlights
    Fannie Mae’s May 2016 HPSI rose 1.6 percentage points in May to 85.3. While the Good Time to Sell component fell 2 percentage points in May, selling a home remains an attractive option as 52 percent of consumers believe it is a good time to sell a home. Overall, the HPSI is up 1 point since this time last year.
     
    The net share of Americans who say that it is a good time to buy a house fell 1 percentage point to 29 percent, reaching an all-time survey low for the second straight month.
     
    Selling sentiment fell slightly in May, with the net percentage of those who say it is a good time to sell falling 2 percentage points to 13 percent. However, an all-time survey high (52 percent) continue to believe it is a good time to sell.
    • The net share of Americans who say that home prices will go up rose 5 percentage points to 42 percent, continuing the rising trend that began in March.
    • The net share of those who say mortgage interest rates will go down rose 3 percentage points to negative 43 percent.
    • The net share of Americans who say they are not concerned with losing their job fell 2 percentage points to 72 percent.
    • The net share of Americans who say their household income is significantly higher than it was 12 months ago rose 7 percentage points to 18 percent, reaching a new all-time survey high.
     
    About HPSI
     
    HPSI distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey (NHS) into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.