Fannie: Housing sentiment dips in February despite growing labor confidence

Despite growing confidence in the labor market, consumer sentiment regarding housing dipped in February, with Fannie Mae’s Home Purchase Sentiment Index (HPSI) dipping by 1.2 points to a reading of 76.5.

The HPSI uses six component questions from Fannie’s National Housing Survey to derive a numerical representation of consumers’ current views and forward-looking expectations of housing market conditions. While the HPSI remained fairly even month to month, the HPSI remains significantly down compared to its pre-pandemic level, sitting 16.0 below its February 2020 reading.

Four of the HPSI’s six components backtracked month over month, most notably the net share of respondents who believe it’s a good time to buy a home. The percentage of respondents who say it’s a good time to buy fell from 52% to 48%, while the share of those who say it’s a bad time to buy grew from 37% to 43%. That brought the net share down 10 percentage points from January.

The net share of respondents who believe it’s a good time to sell also went down, falling 4 percentage points month to month. The percentage of respondents saying it’s a good time to sell decreased from 57% to 55%, while the percentage who say it’s a bad time to sell rose from 33% to 35%.

Also notable was the net share of those who say their household income is “significantly higher” than it was 12 months ago, which fell 9 percentage points from February. The percentage of respondents who reported a “significantly lower” household income compared to last year grew from 14% to 19%, while the percentage of respondents who said their household is “significantly higher” declined from 21% to 17%.

Additionally, more people believe mortgage rates are headed upward, with the net share of Americans who say mortgage rates will go down over the next 12 months down 3 percentage points from January.

The silver lining in Fannie’s latest HPSI report came in the number of people who were optimistic about their job security, with more consumers imparting a significantly more positive view of the labor situation compared to January. The percentage of survey respondents who said they aren’t concerned about losing their job in the next 12 months is up from 75% to 82%, while the percentage of those who are concerned dropped from 24% to 17%. The result was a 14-percentage point month-over-month jump in the net share of people unconcerned about losing their jobs.

“As we expected, the HPSI remained relatively flat in February, but underlying data indicate growing job-related optimism among consumers, especially among lower-income and renter groups,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “With the growing likelihood that lockdown restrictions will continue easing as vaccination efforts ramp up, and with warmer weather on the horizon and another round of fiscal stimulus pending, these two segments of consumers may have good reason to feel more positive about the labor market. This optimism appears to be well-placed, too, given Friday’s jobs report from the Bureau of Labor Statistics, which showed the strongest net gain in payroll employment since October, although the unemployment rate remains quite high by historical standards.

“However, other components of the index remain well below pre-pandemic levels, so we believe there may still be room for improvement in housing and economic attitudes in the coming months, depending in part on the future path of mortgage rates.”


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