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Fannie Mae Index Hits All-Time High in July,,08-18-16 | Economic News

Fannie Mae Index Hits All-Time High in July
Home Purchase Sentiment At Record Level

Fannie Mae's Home Purchase Sentiment Index shot up to its highest level ever, a sign that bodes well for the housing market and its road to recovery.

A nationwide index that gauges public opinion about homeownership shot up to its highest level ever in the month of July, a sign that Americans have become increasingly optimistic about purchasing homes.

Fannie Mae constructs its Home Purchase Sentiment Index (HPSI) through the feedback it derives from its National Housing Survey. In each survey, consumers are asked six questions, including whether they think 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. Then Fannie Mae comes up with a single composite score from the survey data.

"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," Fannie Mae said in a news release about the July HPSI.

The July HPSI shot up 3.3 points to 86.5 to a new all-time survey high, and Fannie Mae said the increase was broad-based, as all six components climbed upward.

"The HPSI reached a new survey high in July, but enthusiasm should be tempered because the increase only returns the index to a very gradual upward trend," said Doug Duncan, senior vice president and chief economist at Fannie Mae.

Fannie Mae's survey and HPSI seem to indicate that more young people in the millennial group are slowly changing their opinion about homeownership versus renting.

"One interesting potential bright note for housing in the July survey is that younger households may finally be shifting toward buying rather than renting in greater numbers," Duncan said. "Whether the shift in sentiment in July toward buying rather than renting on their next move holds up or is a temporary reaction to their view that rents are on the rise and mortgage rates will be lower, we will see.

"However, we are getting set to release some additional research in early August showing evidence of a broader move by older millennials in the direction of ownership," Duncan said.

Each of the six HPSI components increased in July.

Fannie Mae said the largest increases were seen in the net share of consumers who expect home prices to go up over the next 12 months. This jumped eight percentage points after dropping in June.

The net share of Americans who say it is a good time to buy a house rose one point to 33 percent; the net percentage of those who say it is a good time to sell a house rose two points to 20 percent. Also, the net share of consumers who expect mortgage interest rates to go down over the next 12 months went up by five percentage points. The household income component also rose three points to 11 percent, after dropping in June.

Other noteworthy survey results: the share of consumers who said they would buy if they were going to move increased to 67 percent; and the share of consumers who said they would rent moved down to 26 percent, equaling an all-time National Housing Survey low.