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Housing has long been important in the personal lives and finances of individuals. The Great Recession, and the sluggish recovery of the U.S. economy afterward, reinforced judgments that housing importantly affects the job market, the financial sector, and the rest of the national economy.
An improved understanding of housing can help improve housing and macroeconomic policies and forecasts. In 2010, Fannie Mae started its National Housing Survey (NHS) to produce new information about consumers' housing-related attitudes, intentions, and financial conditions. The NHS is the only large-scale, national, monthly survey of consumers focused exclusively on housing. The responses of the nationally representative sample of 1,000 consumers each month to about 100 survey questions promptly provide information on a wide range of housing-related topics.
To effectively and efficiently distill information about consumers' housing-related attitudes, intentions, and conditions, we built a Home Purchase Sentiment Index (HPSI) from the responses to six NHS questions. We intend for the HPSI to reflect current housing market conditions and to provide signals about future conditions in housing markets. In that regard, the HPSI is similar in spirit and construction to the University of Michigan's Index of Consumer Sentiment (ICS) and the Conference Board's Consumer Confidence Index (CCI).
Below we note some of the advantages of survey data generally. We briefly discuss some existing consumer and housing indices. We then discuss how we selected component questions from the NHS and show the new HPSI. We provide evidence about its 2012- 15 performance in forecasting important housing market outcomes: prices, sales, starts, and mortgage originations. In addition, we show the HPSI by age and by income and note other groups for which HPSIs can be easily calculated. Finally, we suggest some of the other aspects of housing where tailored, survey-based indicators might be built to help analysis and forecasting.1
1. Expectations, Surveys, Sentiments, and Housing
Expectations and surveys
Households' expectations have become central to economic analysis, modeling, and policymaking. Long recognized in principle, expectations now figure prominently in practice, permeating discussions and forecasts of consumer spending, business investment, labor costs, inflation, bond yields, and monetary policy. Incorporating expectations is problematic, however, in large part because most data do not directly measure expectations about the future but, instead, measure "the way we were."