The Home Purchase Sentiment Index (HPSI) by Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) recently indicated that people in the U.S. are becoming increasingly apprehensive about the country’s economy. This in turn, may cause a negative impact on real estate and related companies like Masco Corp (NYSE:MAS), which will witness a controlled and doubtful demands from people. In such a scenario, it would be challenging for companies like these to pull off a fair amount of revenue in the times ahead.
The situation of the housing market
The HPSI is the Fannie Mae home purchase index, which was launched earlier this week in a formal manner. This is said to be one of the most reliable predictive indicator of the future of housing market. In the previous few months, the index has seen a downfall from record high of 84.7 (in June 2015) to 80.8. However, it must also be considered that the index has remained higher than what it was in the same time period in previous year. Since September 2014, the index has managed to remain above the range of five-point.
Reason for dropping index
According to the agency, the cause of this scenario is lack of people’s faith in the U.S. economy. Doug Duncan , the chief economist, Fannie Mae says that people have started thinking that the U.S. economy is not on the right path, which is why something is going on in realty sector at the level of households. It is this reduced confidence that is taking toll on the index.
Fannie Mae has, as of now, facilitated approximately $144 billion to the mortgage market, in the form of liquidity. The firm has, so far, surveyed around 1000 people monthly for almost 50 years. The index is a result of evaluation based on the responses from these people. In the survey, questions such as, household income, job prospects, mortgage rates, the direction in which their home prices were going, selling or buying of a home, were included. Thereafter, the net percentage was calculated for every question and this summed up, forming the index base.
According to Duncan, the housing sector remains on the slow, but steady path, which is in accordance with the equity market. However, the turbulence in this sector brings back the haunting memories from the economic meltdown that shook the entire world.
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