Lackluster income growth weighing on Americans’ housing sentiment

by MPA08 Apr 2015
Consumer attitudes toward housing appear to have stalled somewhat amid a recent dip in confidence regarding personal finances and income growth, according to results from Fannie Mae's March 2015 National Housing Survey.

Among those surveyed, the share who expect their personal financial situation to improve over the next year fell to 41% last month, while those who said their household income is significantly higher than it was 12 months ago fell to 22%. Additionally, the share of respondents who said they would buy a home if they were to move decreased 5 percentage points to 60% – a new all-time survey low.

On the bright side, the share of consumers who believe now is a good time to sell a home reached a new survey high of 46%, narrowing the gap with those reporting it is a good time to buy, perhaps signaling a more balanced housing market.

"Consumers are being patient prior to entering the housing market. Our March survey results emphasize how critical attitudes about income growth are to consumers' outlook on housing," Doug Duncan, senior vice president and chief economist at Fannie Mae, said. "We've seen modest improvement in total compensation resulting from a strengthened labor market.”

However, Duncan added that income growth perceptions and personal financial expectations both eased off of recent highs, consistent with Friday's weak jobs report.  “The recent setback in consumer sentiment should be short lived if early signs of income growth bear out and occur in proportion to expected interest rate increases. Meanwhile, the wait for housing expansion continues."

Highlights from the survey:

Homeownership and Renting
  • The average 12-month home price change expectation rose to 2.7%.
  • The share of respondents who say home prices will go up in the next 12 months rose to 48%. The share who say home prices will go down rose to 8%.
  • The share of respondents who say mortgage rates will go up in the next 12 months increased to 52%.
  • Those who say it is a good time to buy a house fell slightly to 66%, while those who say it is a good time to sell rose to 46%– a new survey high.
  • The average 12-month rental price change expectation remained at 4%.
  • The percentage of respondents who expect home rental prices to go up rose to 53%.
  • Those who think it would be easy to get a home mortgage fell by 4 percentage points to 50%, while those who think it would be difficult rose by 3 percentage points to 46%.
  • The share who say they would buy if they were going to move fell 5 percentage points to 60%– a new survey low, while the share who would rent rose to 34%.
The Economy and Household Finances
  • The share of respondents who say the economy is on the right track decreased by 4 percentage points to 43%, while those who say the economy is on the wrong track rose by 3 percentage points to 48%.
  • The percentage of respondents who expect their personal financial situation to get better over the next 12 months fell to 41%.
  • The share of respondents who say their household income is significantly higher than it was 12 months ago fell 2 percentage points to 22%.
  • The share of respondents who say their household expenses are significantly higher than they were 12 months ago rose by 4 percentage points back to 35%.

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