Are Home Buyers Losing Confidence in the Market?

In December 2016, the Fed raised interest rates for the first time that year, and it’s predicted that 2017 will bring more increases. Often this causes home buyers who were thinking about buying to take immediate action.

In the long run, however, increasing rates places the brakes on home buying for most people. Are we beginning to see this? Are home buyers feeling a lack of confidence? Yes and no.

How to Tell if Home Buyers Losing Confidence in the Market?

It relies heavily on what indicators you’re looking at. For instance, The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased in December for the fifth consecutive month. The number of home buyers who believe interest rates will go down over the next several months and those who believe their household income is significantly higher than a year ago decreased by four or five percentage points. These numbers certainly point to the possibility of a softening in the market if this continues.

However, the number of Americans who said they believed it was a right time to buy a house increased during that same period by two percentage points. Also, the confidence of the average American in retaining their job for the near future grew by four points.

When people feel it’s the right time to buy a house and they feel secure in their job, they often will venture into the housing market.

What We’re Watching For

So at this point, it becomes a watch and wait situation. What we’ll be keeping an eye on, and what many economists will be looking for, is whether the post-election confidence continues. Many experts believe the new president will be seeking to institute a lot of pro-growth measures. If that turns out to be the case, it should translate into higher salaries and better job security, which means a boost to consumer confidence.

As Trump’s cabinet takes office and his policy professionals settle in, we’ll be watching which regulations are changed or revoked. However, some of what is expected can’t be done without Congressional approval and legislation, and that takes time.

Trump talked about diminishing big government, and he may have his eye on housing. There are two Republicans in Congress, Jeb Hensarling and Stephen Mnuchin, with admitted interest in disbanding the Dodd-Frank law that’s behind “Know before you owe” and TRID.

Another interesting event that just occurred is the signing of the executive order that cleared the way for two major oil pipelines to be built in the west. The Keystone Pipeline is designed to carry oil from Canada to refineries along the Gulf of Mexico. While it’s too early to precisely predict what that could mean for jobs and the economies of those areas, Forbes did make some early attempts to define it.

It’s a big time for the housing market. It’s been making progress and slowly returning but will the growth remain steady, as it has been, or change drastically?

At Bay National Title, we’re keeping an eye on the market so we can help our customers understand what’s going on and what they can expect. If you want to work with a national title company that puts customers first, contact us today.

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