The convergence of expectations
about both rising home prices and rising rents may motivate more consumers to
purchase a home in the coming months according to Fannie Mae. The company drew this conclusion from results
of its October National Housing Survey released Wednesday morning.
The percentage of survey respondents
who expect home prices to remain about the same ticked up two percentage points
to 48 percent in the October survey while those expecting further price
declines went from 11 to 10 percent, 13 percentage points lower than October
2011 and the lowest level since the survey's inception in June 2010. While the percentage expecting price
increases over the next twelve months declined from 37 percent to 36 percent the
positive difference between those saying home prices will go up and those
saying they will go down remained steady at a survey high of 26 percentage
points. The average price change
expectation went from an increase of 1.5 percent in September to 1.7 percent in
September. Expected price changes have
been in positive territory and steadily increasing since November 2011.
Half of respondents expect rents to
increase over the next 12 months, the highest proportion in the history of the
survey, compared to 47 percent in the previous survey. Only 3 percent expect rents to decline while
43 percent expect rents to be essentially unchanged, up from 42 percent in
September. Anticipated rent increases
jumped 8 basis points in one month to an expected increase of 3.9 percent.
"This has been a year of steady
growth in the percentage of consumers with positive home price expectations,"
said Doug Duncan, senior vice president and chief economist of Fannie Mae.
"Increasing household formation, encouraged by an improving labor market, is
adding additional momentum to the housing recovery and putting upward pressure
on rental price expectations. Expected increases in both owning and renting
costs may encourage more consumers to buy and add further strength to the
housing recovery already under way."
Seventy-two percent of respondents
say it is a good time to buy, while 18 percent say it is a good time to sell,
consistent with the trends seen over the past six months.
Consumers may be further propelled
toward a purchase decision by expectations about interest rates. The percentage of respondents expecting
further rate decreases declined from 10 to 7 percent since the previous survey
while those expecting the rates will increase in the next year went up by 4
percentage points to 37 percent.
When asked about the state of the
economy, the share of respondents who say it's on the right track dropped to 38
percent, down 3 percentage points from last month. Conversely, those who say the
economy is on the wrong track climbed 3 percentage points to 56 percent. The
share of consumers who expect their personal financial situation to get better
or stay the same over the next year remained essentially level at 43 percent
and 40 percent, respectively.
The Fannie Mae Survey polls 1,001
Americans, both homeowners and renters, monthly via phone to assess their
attitudes toward owning and renting a home, home purchase and rental price
changes, homeownership distress, the economy, household finances, and overall