Mixed data released by a government-sponsored enterprise shows positive outlooks on home prices and home loan rates, though a more dour forecast for the economy at-large.
The holiday season can boost some economic factors, including job opportunities and consumer spending, but Fannie Mae's National Housing Survey for December found that many consumers remained concerned about the fiscal cliff.
According to the survey for the last month of the year, 39 percent of respondents agreed that the economy is on the right tack, down 5 percentage points from the November survey. With fear of how a change in taxes could affect their personal finances, more consumers reported having expectations of worse financial situations over the next 12 months, with 20 percent agreeing. This marks the highest level since August 2011, but a final decision regarding the fiscal cliff could ease this worry.
Additionally, 22 percent of those surveyed said their household income increased throughout 2012, but this level has only moved five percentage points since September. While the overall housing market has remained affordable for buyers for most of the year, 37 percent said their household expenses increased significantly since last December. The increased percentage is 3 points more than November levels, while the government-sponsored enterprise notes it was also the highest level since December 2011.
Expectations for U.S. housing market also varied
Overall, economists have predicted higher home prices in 2013, while mortgage rates are expected to remain affordable. Consumers seemingly agreed, with 43 percent predicting home prices will rise over the next 12 months, marking the highest level recorded and up 6 percentage points from November levels. The number of consumers who say mortgage rates will parallel price gains also increased 2 percentage points, up to 43 percent of all respondents.
However, the share of respondents who said they would make the investment of buying a home if they were to move in 2013 fell slightly to 66 percent. Slightly less consumers agreed that this year is a good time to sell, though the month-over-month 2-percentage-point decrease only dropped to 23 percent. When compared on a year-over-year basis, this is 10 percentage points higher, meaning more current homeowners are confident in housing market gains.
"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," said Doug Duncan, senior vice president and chief economist of Fannie Mae.
Another factor that has likely contributed to increased optimism regarding improving home prices and mortgage rates has been a shrunken inventory of foreclosed houses. With less delinquent properties in the mix, the regular housing market should continue to improve throughout 2013.