Consumers Top the Experts in 2012 Home Price Outlook

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For the past six months, one consumer survey after another has tracked increasingly negative expectations about home prices in the year to come while some expert forecasts were more positive. Now, Fannie Mae has turned the tables.

Fannie Mae's December National Housing Survey found that Americans expect home prices to turn the corner and rise by an average of 0.8 percent this year, up from an expected 0.2 percent increase last month. Such an increase, though modest, would be the first positive annual price increase since 2006.

However, Fannie's in-house experts disagree. They forecast that the Federal Home Finance Administration Index will fall an additional .08 percent in 2012 after falling 4.1 percent this year.

The new survey was only incrementally more positive than in the past. Americans who say the economy is on the right track in the December survey rose by 6 percentage points over November, while the percentage who say the economy is on the wrong track dropped by 6 percentage points. On the personal finance side, for the first time since February 2011 more respondents say their financial situation will get better over the next year than say it will stay the same. In turn, the share of consumers who say their income is significantly higher than it was a year ago rose 5 percentage points since last month.

"December attitudes have rebounded from the lows seen during the debt ceiling debate and economic deterioration of Europe this past summer. There is marked improvement in consumer sentiment regarding the direction of the economy, personal finances, and future home price expectations," said Doug Duncan, vice president and chief economist of Fannie Mae. "This improvement is in line with the modest fourth-quarter pickup in the U.S. economy. However, while December results show that more Americans think the economy is on the right track, consumer attitudes are still at depressed levels, with more than two-thirds saying that the economy is on the wrong track."

Other key findings:

•Twenty-six percent of respondents expect home prices to increase over the next 12 months (up 4 percentage points since last month), while 18% say they expect home prices to decline (down 4 percentage points since last month). 52% say prices will stay the same.

•Thirty-six percent of Americans say that mortgage rates will go up over the next 12 months, up 3 percentage points from November and even with October.

•Seventy-one percent of respondents say it is a good time to buy a home (up 3 percentage points since last month), and 11% percent say it is a good time to sell.

•On average, Americans expect home rental prices to increase by 3.5 percent over the next 12 months, up from 3.2 percent in November.

•Five percent expect a decline in home rental prices over the next 12 months (tying May 2011 as the lowest point in the past 12 months), while 43 percent of respondents believe that home rental prices will increase.

•Thirty-one percent of Americans say they would rent their next home, while 64 percent say they would buy, up 1 percentage point from last month.