Good Time for Home Ownership

Fannie Mae survey sees home-purchase intentions looking up.

By Manuel Gutierrez, Consulting Economist to NKBA

The Federal National Mortgage Association, a government agency better known as Fannie Mae, has the job of providing mortgage financing. Although it does not actually allot mortgage funds, it does guarantee mortgage loans.

Each month, Fannie Mae conducts a survey of 1,000 consumers. The questions focus exclusively on home purchase intent and related issues. The latest survey revealed that consumers have become more optimistic about conditions for both buying and selling a home. The overall index rose to 77.5, an increase of 3.3 points for the month. Combined with gains from the previous three months, the index has recovered half the huge loss it suffered in April.

Taking the longer view, the index has been trending steadily higher since 2012, as the chart below indicates. Until the pandemic collapse, consumers were viewing economic conditions more and more favorably in regard to the purchase of a home. They appear to be headed back towards that mindset.

As to the specifics of the survey, Fannie Mae asks a set of questions around six general topics. For each, consumers indicate whether they think conditions are currently “good”, “bad” or “the same” as a previous period, or they may be asked to compare today’s conditions with their perceptions of the future. For instance, one of the questions asks whether consumers believe it is currently a good time or bad time to buy a house.

The results are summarized by tabulating the net differences in percentage between those answering “good” and those responding “bad.” These differences are displayed in the chart below.

For five of the six questions, the net value rose in August. The only exception was regarding future expectations for home prices. Even though more respondents believe prices will rise compared to those who feel prices will decrease, the net difference in August was just seven percentage points, down from 12 in July.

Job environment data is captured by consumers’ concerns about losing their jobs. A large majority did not indicate such a concern until March/April of this year, when the economic shutdown took effect throughout most of the country. The net difference between those “concerned” and those “not concerned” fell from a huge 70%+ at the beginning of the year, to under 50% by June. The figure has improved over the past two months, but still is just at 56% — not much above its smallest differential levels.

The chart below drives home the importance of the survey work performed by Fannie Mae. The overall relationship between home sales and consumers’ net opinion on whether this is a good or bad time to purchase a home correlates fairly closely. Its predictive value of assessing general industry conditions is solid.