Fannie Mae's Chief Economist pointed to the turmoil over the fiscal cliff and debt ceiling for a sharp drop in consumer confidence in December.  Fannie Mae's National Housing Survey recorded a 5 point month-over-month decline in the percentage of respondents who think the nation's economy is "on the right track" to 44 percent while "wrong track" responses rose from 50 to 53 percent.

At the same time confidence in the housing sector grew with consumers showing continued positive attitudes toward home prices, rents, and mortgage rates.  The percentage of respondents who expect home prices to increase over the next 12 months rose from 37 to 43 percent, the highest share in the survey's 2.5 year history.  The percentage expecting price decreases fell from 44 percent in November to 40 percent in December.  Expectations for price increases averaged 2.6 percent compared to 1.7 percent in November, another historic high for the survey.  

Twenty-one percent of respondents say it is a good time to sell, a 2 percentage point decrease from last month's record high, but a 10 percentage point increase year over year.  Seventy-one percent view it as a good time to buy, down one point from November and the share of respondents who said they would buy if they were going to move decreased slightly to 66 percent. 

Doug Duncan, senior vice president and chief economist of Fannie Mae said, "This view is consistent with Fannie Mae's expectation that home prices will rise going forward on a national basis. Combined with consumers' growing mortgage rate and rental price increase expectations, the positive home price outlook could incentivize those waiting on the sidelines of the housing market to buy a home sooner rather than later and thus support continued housing acceleration.  Despite continued strengthening in the housing market, consumers' concerns over the fiscal cliff and debt ceiling have caused considerable volatility in their perceptions of the larger economy. This uncertainty seems to be prompting a growing share of consumers to expect their personal finances to worsen and may contribute to weaker near-term economic growth." 

The percentage who think mortgage rates will go up continued to rise, increasing by 2 percentage points to 43 percent, the highest level since August 2011.  

Almost half (49 percent) of respondents expect rental prices to increase over the next 12 months with the average increase expected to be 4.4 percent compared to 42 percent in November.  The percentage who thinks mortgage rates will go up continued to rise, increasing by 2 percentage points to 43 percent, the highest level since August 2011.

The percentage of consumers who expect their personal financial situation to get worse over the next 12 months continued to rise, reaching 20 percent and the highest level since August 2011.  Twenty-two percent of respondents say their household income is significantly higher than it was 12 months ago, a slight increase over last month and a 5 percentage point increase over September while 37 percent reported significantly higher household expenses in the last year, a 3 percentage point increase over the past month and the highest level since December 2011. 

The Fannie Mae National Housing Survey polls 1,000 respondents by phone each month to assess their attitudes toward homeownership, mortgage rates, household finances, the economy, and homeownership distress.  Respondents include renters, mortgaged homeowners, and those who own unencumbered homes.