Consumer Concerns Stabilize: Home Price Expectations Improve

By Pete Bakel


Amid a spate of positive economic news during the November survey period, consumer sentiment appears to have stabilized from previous levels, with only incremental improvement in the deeply negative housing market sentiment witnessed this summer.

According to results from Fannie Mae's November National Housing Survey, home price expectations moved from negative to positive territory for the first time in six months, with respondents expecting home prices to increase by 0.2 percent over the next year. Overall, trends demonstrate that consumers are in a “wait and see” pattern as we move into 2012. This places consumer sentiment in line with Fannie Mae’s Economics & Mortgage Market Group’s November forecast of temporary economic improvement during the third and fourth quarters of 2011 leading into a slower economic growth path in 2012.

“Though their home price expectations have become slightly positive, consumers remain concerned about the direction of the economy and continue to view their household finances as being relatively flat,” says Doug Duncan, vice president and chief economist of Fannie Mae. “Most Americans expect no improvement in their personal financial situation in the next 12 months and will likely remain wary about undertaking the significant financial obligation associated with homeownership until their view of their income, expenses, and job security heads in a more positive direction.”

Twenty-two percent of respondents expect home prices to increase over the next year (up 3 percentage points since last month), while 22 percent say they expect home prices to decline, down 1 percentage point since last month. 53 percent say prices will stay the same, a 2 percentage point drop from October.
Results show that 33 percent of Americans say that mortgage rates will go up over the next 12 months, down 3 percentage points from October and a return to the level seen in September.

Additionally, 68 percent of respondents say it is a good time to buy a home (down by 1 percentage point since last month), and just 10 percent say it is a good time to sell, which is unchanged from the previous two months.

On average, Americans expect home rental prices to increase by 3.2 percent over the next year, a 0.1 percent decrease from October.

While just 6 percent expect a decline in home rental prices (unchanged since last month), 41 percent of respondents believe that home rental prices will increase in the next 12 months.

The survey also concludes that 32 percent of Americans say they would rent their next home, while 63 percent say they would buy, down 3 percentage points since last month and a return to the level seen in September.

Surprisingly, 66 percent of respondents say their income is about the same, the highest number ever to report this. Sixteen percent of those surveyed say their household income has increased over the past 12 months (down 2 percentage points since October) while 18 percent say that their income has declined significantly.

Fifty-four percent report that their expenses are about the same compared to 12 months ago (up 3 percentage points versus October). Eight percent say their household expenses have decreased over the past 12 months (down 3 percentage points since October), while 37 percent say their expenses have increased significantly.

For detailed findings from the November 2011 survey, as well as technical notes on survey methodology and the questions asked of respondents associated with each monthly indicator, visit the Fannie Mae Monthly National Housing Survey site.