Every month mortgage lender Fannie Mae releases its Home Purchase Sentiment Index (HPSI), which measures attitudes of prospective homebuyers. The May results indicated an all-time high in consumer sentiment. This is especially good news since back in March the survey hit an 18-month low and because the spring and summer months are traditionally the strongest time for home sales.
What’s Driving the Increase?
May’s increase was primarily driven by a seven-percentage point increase in the number of Americans who reported that their “household income is significantly higher than a year ago”. A full 18% of total respondents report having more income in May 2016 than in May 2015.
Other good news in the report included 72% of Americans reporting they are not worried about losing their job and 52% of homeowners saying they believe now is a good time to sell a home.
While several factors are at play when it comes to the housing market, having consumers who are secure in their jobs and feeling wealthier is a positive sign after years of stagnant wage growth and anemic job growth.
Some Mixed Results
While the overall trend in the report was positive for the housing market, there were some mixed numbers in the May results as well. The number of Americans who say that now is a good time to buy a home fell one percentage point to 29%.
This small drop is likely attributable to several different factors. Even though many more people reported a rise in their income in May, many people are still suffering from the longtime pressure on wages. Housing affordability in many urban areas may also explain the drop in people’s perception of this being a good time to buy a home.
However, this small drop was not enough to drag down the overall index, which is encouraging for home sellers.
The report also indicated that 42% of Americans believe housing prices will go up. This number may mean many people will still feel pressure to buy a house in the coming months to avoid having to pay more later. The current low mortgage rates should also help encourage many buyers that now is the time to buy a home.
The May report was a continuation of a rebound that began in April, after a discouraging March report. The numbers are peaking at the right time as the summer housing season is now in full swing.
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