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Measuring Consumer Economic and Housing Market Expectations

Inflation expectations declined in April, according to the latest Survey of Consumer Expectations from the Federal Reserve Bank of New York. Additionally, the Fed’s survey revealed that consumer expectations of home-price changes remained stable at their recent low level of 3.0% in April, the fifth consecutive reading at this level.

Household income and spending both increased, according to the survey. Median expected household income growth increased slightly from 2.8% in March to 2.9% in April, moving just above its trailing 12-month average of 2.8%. Median household spending growth expectations increased from 3.1% in March to 3.3% in April. Spending growth expectations have been volatile and exhibit seasonality.

Fewer Americans are concerned about unemployment as well. Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased 1.5 percentage points in April, to 35.7%, and is now 4.9 percentage points below its almost five-year high reached in January.

According to the latest Fannie Mae Home Purchase Sentiment Index (HPSI), despite the upbeat economic activity, many are still pessimistic about the housing market.

“While home selling confidence remains strong and more consumers on net expect mortgage rates to decline over the next year, respondents walked back some of their buying optimism from March,” said Doug Duncan, SVP and Chief Economist at Fannie Mae. “Improving perceptions of income gains and a softening home price growth outlook should help support housing demand. However, increasing expectations among consumers that mortgage rates will continue to be favorable for some time will likely gain additional support following last week’s Fed meeting – and may also be reducing their urgency to buy.”

The consumer outlook on whether now is a good time to sell has remained relatively unchanged, at 43%, but down 2% year over year. Additionally, the net share of Americans who say mortgage rates will go down over the next 12 months increased 5 percentage points to -40%. This component is up 8 percentage points from the same time last year.

About Author: Seth Welborn

Seth Welborn is a contributing writer for DS News. He is a Harding University graduate with a degree in English and a minor in writing, and has studied abroad in Athens, Greece. An East Texas native, he also works part-time as a photographer.
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