Affordability is becoming an issue based on more than just rising
interest rates and rising home prices according to the latest Home Purchase
Sentiment Index (HPSI) from Fannie Mae.
That index dipped by 1.7 points from December to January, resulting in a
reading of 81.5. Those results, the
company said, reflected in part housing affordability constraints based on
HPSI distills answers to six critical questions from the monthly National Housing
Survey into a single number. The survey
is conducted by Fannie Mae among a sample of 1,000 consumers, both homeowners
and renters and is intended to gather their
current views and forward-looking expectations of housing market conditions and
address topics that are related to their home purchase decisions. The questions
used to construct the index are those questions consumers as to whether they
think that 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.
It was that last issue that caused some
affordability concerns in the January results.
The share of consumers who reported that their income was significantly
higher than it was 12 months ago fell 3 percentage points after climbing 9
percentage points on net in December.
There was also a 4 point decline in the number of respondents who said
it was a good time to buy a house. That
continued a net downward trend in that response throughout 2015. It now stands at61 percent, a survey low with
a net between positive and negative answers of 31 points.
affordability is being constrained because the pace of growth in real income
has not kept up with gains in real home prices as demand has grown faster than
supply," said Doug Duncan, senior vice president and chief economist at Fannie
Mae. "On the bright side, consumers have been increasingly positive about their
ability to get a mortgage, suggesting that credit tightness is not the main
issue limiting housing market activity today, a feeling that we also see
conveyed by lenders in our Mortgage Lender Sentiment Survey®. We
expect further progress in the HPSI to be limited until income growth picks up
or supply, particularly in lower-priced homes, expands more rapidly."
While four of the six HPSI components
decreased in January, Good Time to Sell rose by 1 point to a net of 9 percent and
Mortgage Rate net expectations stayed the same at negative 52 percent. The latter number is derived from a total of
57 percent who expect rates to rise while only 5 percent expect them to fall. Fewer
respondents on net said house prices will continue to rise, down 3 points to 37
percent. Overall, the HPSI is down 1.3 points since this time last year.
An all-time survey high was maintained
as 85% of respondents say they are not concerned about losing their job however
the net positive responses to this question fell 1 percentage point to 71%. The net share of respondents who say their
household income is significantly higher than it was 12 months ago fell 3
percentage points to 12%.
The National Housing Survey asks its
rotating panel of respondents over 100 questions, comparing survey answers with
those over the history of the survey which began in June 2010. The phone survey seeks to track attitudinal
shifts. The January 2016 National
Housing Survey was conducted between January 1, 2016 and January 25, 2016. Most
of the data collection occurred during the first two weeks of this period.