Consumers believe that their outlook is getting better. But they are not necessarily ready to participate in the housing market just yet. The June Housing Survey released by Fannie Mae shows that consumer sentiment toward the housing market is continuing to improve as the overall economic outlook improves but it still sits well below the level necessary for the market to normalize.
Doug Duncan, seniour vice president and chief economist at Fannie May remarked that since monthly National Housing Survey data had been collected in June 2010, substantial progress in consumer home price expectations and other key attitudinal measures were noted as the housing recovery gained its footing. However, he does not not expect to see ‘normal’ levels of new residential construction, which he feels would equal 1.6 million new housing units per year, before the end of 2016, which was the original projection. That would require a pace of growth in housing starts not seen in decades.
The survey indicates that consumer’s twelve month home price change expectation remained positive but dipped slightly compared to previous months, coming in at 2.4 percent. Further, 55 percent of consumers expect mortgage rates to increase in the next year. Duncan feels the uptick noted this month in the share of consumers expecting mortgage rates to go up and the accompanying decline in home price expectations reflect the pause of activity in the housing market so far this year. Despite recent improvement, an annual decline in existing home sales is expected due to weak volume in the first four months of the year, associated with the rise in mortgage rates mid-last year and the current lack of supply of lower-priced homes.
There is reason to believe that activity could pick up in the second half of 2014. According to the survey, the share of consumers who said that they were worried about losing their jobs dropped to the lowest level recorded since Fannie Mae began collecting the data in 2010. An improving expectation level is consistent with the improving employment landscape. The new found security could spur potential homeowners to stop putting off their next home purchase. They appear to be more confident in their ability to get it done. In fact, 52 percent of respondents to the survey thought it would be easy for them to get a home mortgage today. A good second quarter is needed to ensure that confidence in the recovery continues to steadily improve.
If you feel you are ready to buy or sell your home, please call me at 602-739-0095.