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Consumer confidence in housing market surges

by Andrew Morrell

Surveys of American consumers continue to point to renewed optimism in the housing market. Fannie Mae’s Home Purchase Sentiment Index approached an all-time high reading in March, gaining five points over February to reach 89.8. This was driven by greater numbers of survey respondents who believed it was a good time to buy as well as sell a home, although seller confidence remained the highest of the two.

“A brighter housing market outlook drove this month’s increase in the HPSI – a welcome sign from consumers as we enter the spring and summer homebuying seasons,” said Doug Duncan, senior vice president and chief economist at Fannie Mae in a news release.

Falling mortgage rates likely played a significant factor, Duncan said, with the last five months of HPSI responses showing increased confidence that rates will keep falling. Indeed, average 30-year mortgage rates were below year-ago levels as March began, and only went lower as the month went on. As of April 4, the average rate on a 30-year fixed loan was almost unchanged from the beginning of 2018, at 4.08 percent according to Freddie Mac.

“Meanwhile, job confidence – little changed from last month’s survey high – also continues to support housing sentiment, while income growth perceptions firmed from both prior month and year-ago levels, potentially supporting an uptick in housing demand,” Duncan said. This combination of factors drove the March HPSI to its highest level since last June, which itself marked the 8-year-old survey’s all-time high reading.

Despite recent reports indicating a shift to a more buyer-friendly housing market, seller confidence is still higher and recorded a 13 percent monthly increase in March, according to Fannie Mae. On net, 43 percent of respondents felt it was a good time to sell a home, while 22 percent expressed confidence in buying (a 7 percent monthly increase). Confidence in selling a home has been higher than that for buying one since around the spring of 2017, as measured by the HPSI.

Other high-level findings from the March HPSI report:

  • Americans remain confident in the job market, with 80 percent of respondents saying they weren’t concerned about losing their job in the near future. This was a 1 percent increase from the prior month and a 9 percent increase over March 2018.
  • More respondents (20 percent) say their household income grew “significantly” in the last year. Positive responses to this question increased 2 percent from February and 3 percent compared to March 2018.
  • Consumers are expecting more modest home price gains this year. The net share of respondents who believe prices will rise increased 5 percent over February, to 38 percent, but decreased 4 percent compared to a year ago.

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