While consumers are still conflicted about whether it is still a good time to buy or to sell, their perceptions about financial aspects of their lives improved and along with it Fannie May's monthly Home Purchase Sentiment Index.  The HPSI, a distillation of answers to the company's National Housing Survey, increased by 1.6 points to 85.3 in May.

The May reading was a survey high and a strong rebound from March when the HPSI had fallen to 80.2, an 18-month low.   Three of the six HPSI components increased in May, led by a 7 percentage point increase on net in the share of consumers reporting that their income was significantly higher than it was 12 months ago.  Net responses indicating consumers expect home prices to increase over the next 12 months rose 5 percentage points (with an average expectation of a 3.7 percent appreciation) while rents are expected to increase by 2.4 percent over the same period.  Those who expect mortgage rates to fall over the next year increased by a net of 3 points.

The Good Time to Buy responses retreated by another 1 point on net, setting another all-time survey low and Good Time to Sell was down a net of 2 points.  Slightly more consumers reported concern about losing their job compared to April, but the overall trend has continued to decrease, a 9-point net change year-over-year.

"Continued home price appreciation has been squeezing housing affordability, driving a two-year downward trend in the share of consumers who think it's a good time to buy a home," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "The current low mortgage rate environment has helped ease this pressure, and fewer than half of consumers expect rates to go up in the next year. While the May increase in income growth perceptions could provide further support to prospective home buyers as the spring/summer home buying season gains momentum, the effect may be muted by May's discouraging jobs report."

The National Housing Survey is conducted by Fannie Mae among a sample of 1,000 consumers, both homeowners and renters and is intended to gather their current views and forward-looking expectations of housing market conditions and address topics that are related to their home purchase decisions. The questions used to construct the index are those questions consumers as to whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.