Garnet Capital Advisors Blog

June 17, 2014

Fannie Mae poll: Weak consumer sentiment hampers housing market

Many consumers have lackluster feelings about the economy or their household income, according to the results of a recent Fannie Mae poll.

Of those who took part in Fannie Mae's May 2014 National Housing Survey, 57 percent asserted that the economy is going in the wrong direction. Another 38 percent said that business conditions are getting better. This figure was 3 percent higher than the previous month.

Participants not optimistic about personal finances
When respondents got a chance to speak to their own circumstances, 42 percent predicted their personal financial situation will improve in the coming 12 months. This portion was slightly lower than the number who forecast this situation during the month before.

Participants spoke to their household income, with 21 percent reporting a substantial increase in this key measure of economic health, down 4 percent from the last poll, according to American Banker.

Survey participants also gave their input on the housing market, weighing in on matters such as whether now is a good time to buy or sell. More than two-thirds of respondents, or 68 percent, asserted that now is a good time to purchase a house. This figure represented a modest decline from the prior poll. In addition, 43 percent stated that current market conditions make it a good time to sell a home.

Respondents less confident in housing appreciation
People taking part in the latest version of the poll were less optimistic about home price appreciation, the media outlet reported. While 48 percent predicted that home prices will move higher in the coming 12 months, this figure fell 7 percentage points from the previous year.

In addition, participants forecast that homes would rise in value over the same period, but the average forecast was for a 2.9 percent gain. This prediction has fallen 1 basis point from the prediction supplied in May 2013, according to the news source.

Doug Duncan, senior vice president and chief economist at Fannie Mae, commented on the situation in a statement.

"Consumers' lukewarm income expectations and reticence about the economy seem to be holding back housing demand," he said. "This year's spring and summer home buying season has gotten off to a slow start, even as mortgage rates have trended lower over the past two months."

"Our National Housing Survey data show that economic conditions continue to be the top concern among consumers who think it's a bad time to buy or sell a home," he continued. "While recent housing activity suggests that the worst of the housing slump may be behind us, this caution among consumers supports our expectation that the rebound in home sales will likely be too modest to pull sales for all of 2014 ahead of last year." 

Amid this environment, many banks are having a hard time making good loans and are turning to the secondary markets to buy high-quality income-producing assets.

Garnet Capital Advisors represents financial institutions looking to sell loan portfolios, and has significant experience in this space.