Stagnant wages weigh on housing outlook
The Fannie Mae Home Purchase Sentiment Index decreased in June, down from May’s all-time survey high as more consumers report mixed views toward housing and income growth.
The HPSI decreased by 2.1 points to 83.2 in June, down from May’s85.3.
The HPSI distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey into a single number. The number 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’s pullback in June from last month’s survey-high reading suggests a slight weakening in the 12-month outlook for housing activity,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “Pending home sales have pulled back in the face of continued home price growth, and we’re seeing some softening in the higher priced components of the market.”
Among those surveyed, those who say now is a good time to sell a home increased by five percentage points to a high of 18%. After three straight months of declines, the Americans who say now is a good time to buy a home rose three percentage points to 32%.
Those who expect home prices to increase over the next year decreased by nine percentage points. Also, those who reported their household income is significantly higher than it was last year dropped 10 percentage points in June, and those concerned about losing their job fell 4 percentage points.
Consumers have a worse outlook on the state of the economy as those who think the economy is on the wrong track increased to 59% in June.
In fact, rising home prices in the U.S., waning economic growth in many countries and a strengthening U.S. dollar combined to bring down the dollar volume of international sales in U.S. property over the past year, according to a survey by the National Association of Realtors.
“Growing pessimism about the overall direction of the economy gives us further pause as it now stands at the highest level we’ve seen in our National Housing Survey in the last two years,” Duncan said. “Meaningful improvement in the housing market going forward will likely require consistent upward movement in consumers’ income growth perceptions, which have thus far been stagnant.”
“Also helpful would be an acceleration of supply accumulation of entry-level homes, which would moderate the growth of real home prices and increase affordability,” he said.