MReport December 2021

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60 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT Fannie Mae Market Report: Consumer Sentiment and Housing Despite pessimism regarding the U.S. economy, and a predicted rise in rates, a new GSE poll found homebuyer sentiment on the rise in October. F annie Mae's Home Pur- chase Sentiment Index (HPSI) increased one point to 75.5 in October, with consumer expressing mixed feelings on the current homebuy- ing and home selling markets. In addition, a good majority of those polled felt pessimistic toward the overall financial land- scape of the U.S. economy. "The HPSI remained relatively flat this month, staying within the general bounds it began to set in June 2020—following the initial shock of the pandemic to the index," said Doug Duncan, Fannie Mae SVP and Chief Economist. "While homebuy- ing and home-selling sentiment remain at historically low and high levels, respectively, more consumers now expect that their personal financial situation will not improve over the next 12 months. This is particularly true among surveyed homeowners and older age groups." Overall, four of the six com- ponents of the HPSI increased month over month, with slightly greater shares of consumers reporting that it was a good time to buy a home and sell a home— with those numbers now sitting at 30% and 77%, respectively, up from 28% and 74% last month. Consumers also reported even stronger expectations that mortgage rates will increase over the next 12 months, the Federal Reserve recently announced that it will begin a gradual taper, eas- ing away from emergency stimu- lus after jumping into action to maintain economic stability at the outset of the pandemic in March 2020. Part of the Fed's rollback will include scaling back the pur- chase of billions in government bonds and other assets monthly, reducing its current pace of $120 billion purchased presently, and dropping that total to $105 billion in November, and to $90 billion by December. The Fed's taper- ing will place upward pressure on mortgage rates, as noted by Odeta Kushi, First American Deputy Chief Economist, who notes that forecasts from econo- mists predict that rates will hit 3.2% by the end of the year and inch toward the 4% mark by the close of 2022. "In October, consumers also reported greater concern about the direction of the economy, with 'right track' sentiment reaching its lowest level since October 2013," Duncan said. "We believe the uptick in negative economic sentiment is likely a function of ongoing supply chain disruptions and inflation con- cerns. However, while economic uncertainty could potentially dampen mortgage demand over the longer term, we believe cur- rent market conditions remain conducive to home purchase activity, as demand for homes continues to far outstrip the sup- ply available for sale." HPSI highlights for October include: • Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home increased from 28% to 30%, while the percentage who say it is a bad time to buy decreased from 66% to 65%. As a result, the net share of those who say it is a good time to buy increased three percentage points month over month. • Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home increased from 74% to 77%, while the percentage who say it's a bad time to sell decreased from 19% to 17%. As a result, the net share of those who say it is a good time to sell increased five percentage points month over month. • Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months in- creased from 37% to 39%, while the percentage who say home prices will go down decreased from 24% to 22%. The share who feels home prices will remain unchanged decreased from 33% to 32%. • Mortgage Rate Expectations: The percentage of respon- dents who say mortgage rates will go down in the next 12 months decreased from 8% to 5%, while the percentage who expect mortgage rates to go up increased from 51% to 55%. The outlook on this may drasti- cally change amid news of the Fed's tapering as announced last week. • Job Concerns: The percent- age of respondents who say they are not concerned about losing their job in the next 12 months increased from 81% to 84%, while the percentage who say they are concerned decreased from 16% to 15%. Further confidence in a strong job market was found last week by the Bureau of Labor Statistics (BLS), who reported that the American economy added 531,000 jobs in October, and the unemployment rate was 4.6%, down from 4.8% in September. U.S. Secretary of Labor Marty Walsh noted that 5.6 million jobs were added since the President took office, with an average of 620,000 jobs added per month. • Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 27% to 23%, while the percent- age who say their household income is significantly lower decreased from 13% to 12%. The percentage who says their household income is about the same increased from 57% to 62%. Unemployment contin- ues to tail off week to week as the U.S. Department of Labor reported that for the week ending October 30, the advance figure for seasonally adjusted initial unemployment claims was 269,000, a decrease of 14,000 from the previous week's revised level, the lowest level for initial claims since March 14, 2020, when it was 256,000.

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