Fannie Mae Bullish About The Housing Market

After the nightmarish 2020 year, the country’s overall economy is slowly recovering, and the housing market seems to be at the forefront of that recovery. After the uptick in mortgage applications and continued lower interest rates, the beginning of 2021 has brought more positive trends, including a small leap in the Home Purchase Sentiment Index (HPSI).

Fannie Mae’s composite index showed 77.7 points in the HPSI for January; a clear 3.7 points rise from December 2020. Of course, it’s nothing close to the pre-pandemic indicators since the HPSI still needed 15.3 points to catch up year over year rating.

What does this upward trend mean for buyers, sellers, and the overall housing market? Will this positive sign remain constant for the rest of the year?

A Breakdown of the Market Sentiment

According to the Fannie Mae index, a 16% surge in the section of "Selling Conditions" means that a significant number of buyers consider the current month a good time to sell. This newfound confidence is matched with a 5% rise in household income and 2% more consumers reckoning it to be a good time to buy.  

Fannie Mae’s Chief Economist, Doug Duncan, stated that the lower-income and renter groups played the catalyst in reversing December’s decline last year. It could mean that these groups are the direct beneficiaries of the household income surge and have put their trust in recent government stimulus packages and fiscal policies.

Similar trends are supported by CoreLogic’s recent monthly report of Loan Performance Insights for November 2020. It shows the highest drop in mortgage delinquencies since the beginning of the COVID-19 pandemic. At the end of November, only 6% of all mortgages were in delinquency, and the rate had been declining since August last year. This downturn will directly influence the number of distressed sales, which is suitable for the market.

The CoreLogic report also shows a sharp decline in the unemployment rate, which was 14.8% in April but dropped to 6.7% at the end of the year. Both these factors indicate financial growth and stability for millions of families.

Some government-funded initiatives also have helped in changing the dynamics. Struggling mortgagors were able to take advantage of some programs that allowed them to delay the monthly installments in three-month increments. Along with the decreasing unemployment rate, many homeowners have found their footing and started making payments again.

All of these trends are positive for the housing market. Both the Fannie Mae index and CoreLogic report portray a condition favorable for both sellers and buyers. Stable household incomes and low mortgage rates have encouraged buyers to make a move in the market. Similarly, high home prices, low housing inventory, and people’s growing interest in buying have worked in favor of the sellers. 

Many undecided consumers are waiting for the success of the coronavirus vaccination program and the new fiscal policies. However, the current trends foretell a recovering economy and a healthy housing market.

Sources: fanniemae.com & corelogic.com