Consumer Sentiment Appears to be Reaching Plateau Heading into Summer Season

June 07, 2012

Americans' "Wait and See" Attitudes Indicative of Decelerating Job Growth and Flattening Macro Trends

Pete Bakel

202-752-2034

WASHINGTON, DC – Gradual positive trends in consumer attitudes observed since early fall 2011 appear to be reaching a plateau, according to results from Fannie Mae’s May 2012 National Housing Survey.  Recent consumer attitudinal trends reflect overall macroeconomic indicators, which point to a continued lull in the pace of employment and income growth.

“Our May consumer data show that Americans are taking a ‘wait and see’ approach about buying or selling a home.  This is not surprising given their assessment that their income during the past twelve months and their personal financial expectation for the next twelve have leveled off.  These data are in line with what we are seeing on the macroeconomic front, as upside and downside risks and activities are moderating one another,” said Doug Duncan, vice president and chief economist of Fannie Mae.  “Current jobs data are reminiscent of the spring slowdown that continued into the summer months during the last two years.  If this pattern continues, we do not expect to see any significant upturn in consumer sentiment during the summer and a meaningful housing recovery likely will be delayed once again.”

The leveling of consumer attitudes can be seen in Americans’ inclination to buy (versus rent) their next home despite some mildly positive trends.  Forty-one percent of National Housing Survey respondents expect home mortgage rates to go up in the next twelve months (a slight increase from last month).  At the same time, on average, Americans expect home prices to increase 1.4 percent over the next twelve months (up from 0.9 percent in March 2012 and the highest value yet recorded.)  Both indicators suggest the potential that consumers may consider moving off the sidelines to purchase a home.  Nevertheless, the percentage of respondents who would buy is down to 63 percent in May from 64 in April and 66 percent in March.

SURVEY HIGHLIGHTS

Homeownership and Renting

• On average, Americans expect home prices to increase by 1.4 percent over the next 12 months, up 0.5 percentage points since March 2012 and the highest value yet recorded.
• Thirty-four percent of respondents say that home prices will go up in the next 12 months, the highest level recorded since March 2011.
• Forty-one percent of respondents expect home mortgage rates to go up in the next twelve months, a slight increase from last month.
• The percentage of respondents who say it is a good time to buy increased by 1 percentage point to 72 percent, while the percentage of respondents who say it is a good time to sell remained at 15 percent.
• On average, respondents expect home rental prices to increase by 4.1 percent over the next 12 months, a 0.5 percentage point increase versus last month and a return to the level seen in March.
• Forty-nine percent of respondents think that home rental prices will go up, consistent with last month’s value and remaining the highest number recorded to date.
• At 32 percent, the percentage of respondents who would rent if they were going to move is unchanged, while 63 percent would buy.

The Economy and Household Finances

• Belief that the economy is on the right track hit an all-time high this month at 38 percent.
• 46 percent of respondents expect their personal financial situation to stay the same over the next 12 months, a 2 percentage point increase from last month, while the percentage of those who expect their situation to worsen remained steady at 12 percent.
• Fifteen percent of respondents say that their household income is significantly lower than it was 12 months ago, a record low.
• Thirty-two percent say their expenses have increased significantly over the past 12 months, a 4 percentage point decrease from last month and the lowest value since the survey began.

The most detailed consumer attitudinal survey of its kind, the Fannie Mae National Housing Survey polled 1,002 Americans via live telephone interview to assess their attitudes toward owning and renting a home, mortgage rates, homeownership distress, the economy, household finances, and overall consumer confidence.  Homeowners and renters are asked more than 100 questions used to track attitudinal shifts (findings are compared to the same survey conducted monthly beginning June 2010).  Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future.

For detailed findings from the May 2012 survey, as well as a podcast providing an audio synopsis of the survey results and technical notes on survey methodology and questions asked of respondents associated with each monthly indicator, please visit the Fannie Mae Monthly National Housing Survey site.  Also available on the site are quarterly survey results, which provide a detailed assessment of combined data results from three monthly studies. The May 2012 Fannie Mae National Housing Survey was conducted between May 3, 2012 and May 24, 2012.  Interviews were conducted by Penn Schoen Berland, in coordination with Fannie Mae.