Rising Incomes Key To Housing Growth

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For many months, real estate analysts and economists have been forecasting improved home sales and housing activity this spring and throughout 2015. Part of the reason for the optimistic outlook has been the improving job market and the expectation that Americans would begin to see increasing incomes this year. However, the year got off to a slower than expected start and subdued economic reports have led to a dip in overall sentiment, according to the latest National Housing Survey from Fannie Mae. The survey found fewer respondents saying they expect their personal financial situation to improve over the next 12 months. There were also fewer participants who said their income was significantly higher than it was one year ago. Doug Duncan, Fannie Mae’s senior vice president and chief economist, said the results emphasize how critical attitudes about income growth are to Americans’ feelings about the housing market. “We’ve seen modest improvement in total compensation resulting from a strengthened labor market,” Duncan said. “However, income growth perceptions and personal financial expectations both eased off of recent highs … Simultaneously, the share of consumers expecting to buy on their next move has declined. We believe the recent setback in consumer sentiment should be short lived if early signs of income growth bear out and occur in proportion to expected interest rate increases.” More here.

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