Consumers See Price Hikes Easing and Credit Tightening, Homebuyer Sentiment Hits Two-Year Low, Job G
Consumers See Price Hikes Easing and Credit Tightening
Consumers expect the rate of inflation to slow in the coming year, and they’re concerned tighter access to credit will make it harder to pay for big-ticket items later on.
The Federal Reserve Bank of New York’s April consumer expectations survey shows respondents expect inflation to reach 6.3% within the next year, down three-tenths of a percent from the median response in March. Inflation hit a 40-year high of 8.5% in March, according to the Commerce Department.
Consumers expect inflation to come back down to 3.9% three years from now, and look to be spending more going forward, though for the fourth consecutive month they also expect credit to become tighter in the form of rising interest rates.
Housing purchase and rent expectations, as always, could affect multifamily property if people feel they will be locked out of home-buying and need to rely on renting, further boosting demand for apartments. The New York Fed’s latest rent survey data, issued last month for February, showed consumers expect rents to rise 11.5% over the coming year, well up from the 6.6% they were anticipating a year ago.
The latest Fed April survey data for single-family home prices shows respondents expect costs to rise 6% in the coming year, unchanged from a month earlier but still elevated compared with pre-pandemic levels. Consumers expect household income to rise 3.1% and household spending to climb 8%, both up slightly from March.
The survey found consumers are bracing for gas prices to rise 5.2% in the coming year, down sharply from the 9.6% hikes they were expecting a month earlier. But they are still expecting food prices to climb 9.4% and medical care prices to rise 9.5%, both slightly lower than March expectations.
Homebuyer Sentiment Hits Two-Year Low
The latest numbers from Fannie Mae, a government-sponsored enterprise running home loan programs, suggest consumers have become more sour on their prospects to become buyers, and rental housing is in no danger of falling out of high demand anytime soon.
Fannie Mae’s monthly Home Purchase Sentiment Index fell in April to its lowest level since May 2020, mostly because of affordability constraints and rising mortgage rates. The index, based on surveying about 1,000 people nationwide and using June 2010 as a baseline of 100, registered a 68.5 in April, down 4.7 points from the prior month.
Fannie Mae Chief Economist Doug Duncan said consumers continue to report difficult homebuying conditions amid household budget-tightening constraints and rapid home price escalation.
“The current lack of entry-level supply and the rapid uptick in mortgage rates appear to be adversely impacting potential first-time homebuyers in particular, evidenced by the larger share of younger respondents, aged 18-34, reporting that it’s a bad time to buy a home,” Duncan said Monday in a statement from Washington, D.C.-based Fannie Mae.
Consumers of all age groups are downsizing expectations regarding the ease of getting a home mortgage, with affordability “poised to become an even greater constraint going forward,” Duncan said. He noted the sentiment is consistent with Fannie Mae’s forecast of decelerating home sales through the rest of 2022 and into 2023.
Employment Growth Slows
Job growth is expected to remain steady in the coming months with historically low unemployment rates, even as employment growth slowed slightly during April, according to a widely watched index.
The Conference Board, a New York-based economic research organization, said Monday that its monthly Employment Trends Index, derived from metrics such as hiring activity, job openings and job-seeker sentiment, fell slightly in April to 120.18, down from 120.78 in March.
Numbers above 100 signal employment growth, which in turn generally boosts demand for commercial real estate.
“The labor market is continuing to add jobs, especially in in-person services and in other industries that have yet to fully recover job losses incurred since the pandemic,” said Agron Nicaj, associate economist at the Conference Board, in a statement. “We expect these industries to experience the greatest job and wage gains in the coming months as labor shortages show no signs of alleviating.”