Consumer Trepidation About Personal Finances Could Hold Back Housing

November 6, 2019 | Comments Off on Consumer Trepidation About Personal Finances Could Hold Back Housing

October 8, 2019

Concerns over personal finances are giving some home buyers the jitters even as lower mortgage rates are boosting affordability, a new consumer index from Fannie Mae finds. Consumer sentiment in housing dropped in September from August’s high, the index found.

More respondents believe now is a good time to buy and sell a home, but there was a notable drop in the share of consumers who said they were not concerned about losing their jobs.

Overall, Fannie Mae’s consumer sentiment index on the housing market fell in September by 2.3 points to a reading of 91.5. Still, it is 3.8 points higher compared to a year ago.

“Consumer sentiment remains relatively strong overall, though uncertainty about the economy and individual financial circumstances appear to be weighing on housing market attitudes a bit more than a month ago,” says Doug Duncan, Fannie Mae’s chief economist. “Consumers who are pessimistic about current housing market conditions are more likely to cite unfavorable economic conditions than the prior month. Job confidence remains high but still well shy of its July reading.”

The share of consumers who say their household income is significantly higher than it was a year ago was at 21% in the September survey.

More consumers do believe now is a better time to buy rather than sell. Lower mortgage rates are helping to spread that attitude. Because of lower mortgage rates, average monthly payment on an average priced home is 10% lower than it was last November when mortgage rates were nearing 5%, Black Knight reports. Lower mortgage rates are allowing buyers to purchase a home that costs $46,000 more and pay the same monthly payment as they would have compared to last November, Black Knight data shows. Home prices are still rising, but they are moderating.

“Back in November 2018, we were reporting on home affordability hitting a nine-year low,” says Black Knight Data & Analytics President Ben Graboske. “Interest rates were nearing 5%, pushing the share of national median income required to make the principal and interest (P&I) payments on the purchase of the average-priced home to 23.7%. While still below long-term averages, that made housing the least affordable it had been since 2009, spurring a noticeable and extended slowdown in home price growth.”

Here are some additional findings from Fannie Mae’s latest consumer housing survey taken in September:

  • 28%: The net share of Americans who say now is a good time to buy is up 3 percentage points.
  • 44%: The net share of those who say it’s a good time to sell increased by 4 percentage points, matching the same level as July.
  • 29%: The net share of Americans who say home prices will rise is down 7 percentage points, continuing a decline that started in June.
  • 69%: The net share of Americans who say they are not concerned about losing their job is down 8 percentage points and continuing a decline from last month.


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