Home buyer sentiment remained high as 2019 wrapped up, according to the latest (HPSI) for December.聽 The index which measures housing attitudes, intentions, and perceptions, using six questions from the National Housing Survey庐 (NHS), is a good yet lagged indicator of聽 eventual buyer and seller behavior during peak home buying seasons. The December HPSI increased 0.2 points over November and 8.2 points over last December to 91.7, staying near the survey high set in the summer. Four of the six measures in the index increased on a yearly basis, with job security and income growth the only two factors consumers feel less rosy about compared to this time last year.
Interestingly, the net share of respondents who say it’s a good time to buy remained visibly higher than last year (27 vs 11%).聽 The same was true for net share of respondents who think it’s a good time to sell (43 vs 36%). However, the net improvement on selling sentiment came largely from a decrease in the share of those who think it’s a bad time to sell as opposed to upward movement on those who think it’s a good time to sell. While nuanced, this pattern could point to home owners and potential sellers adjusting to moderated prices and the smaller upside on flipping and selling profits. Effectively, this suggests more sellers are thinking their home will sell quickly but only if priced and marketed properly.
The continued optimism from home buyers in the December Fannie Mae National Housing Survey reflected improved overall housing affordability and unfaltering purchase intentions.聽 However, the clear deceleration in underlying attitudes toward economic conditions and personal finances is a clear hint that 2020 could bring new obstacles for buyers. Crucially, the impact of these measures of sentiment to effective home sales is heavily conditioned by availability of inventory. The number of homes for sale remains at a historic low and continue to shrink. Historically, the trajectory of inventory levels takes at least 6 months to change direction poising a challenge in the early spring home buying season. This is particularly relevant as home buying seasons grow flatter and buyers start searching earlier each year. The supply of homes is likely remain a slow moving pendulum in 2020 as sellers react to buyers sensitivities and buyers react back to shifts in inventory and their own finances.
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