A home-buying sentiment index from Fannie Mae weakened for the third straight month in October, a sign the market’s momentum may be faltering.
Fannie’s home purchase sentiment index fell 1.1 percentage points to 81.7. After climbing as high as 86.5 in July, the index has fallen every month since then. It’s now 1.5 percentage points below its level from a year ago.
“Since July, more consumers, on net, have steadily expected mortgage rates to rise and home price appreciation to moderate,” said Fannie chief economist Doug Duncan in a statement. “Furthermore, consumers’ perception of their income over the past year deteriorated sharply in October to the worst showing since early 2013.”
The index includes six components from a monthly survey the mortgage buyer FNMA, +0.80% conducts of 1,000 Americans on owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence.
Slightly more respondents said mortgage rates would rise in the next 12 months – 50% versus 49% in September. While most economists expect the Federal Reserve to raise interest rates at its December meeting, it’s not clear how much of an impact that will have on mortgage rates, which remain near all-time lows.
And while the share of respondents expecting home prices to increase fell to 41% in October from 43%, prices seem to be defying gravity.
Respondents in Fannie’s survey expect home purchase prices to appreciate 1.9% over the next 12 months. Data provider CoreLogic forecasts home prices will rise 5.2% over the next 12 years, and many analysts and industry participants believe prices are increasing too quickly for most would-be buyers to keep up.