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Rising Consumer Expectations Could Bode Well for Housing

Up and Down Graph BHEncouraging news about consumer earnings could lead to more home sales in an already healthy growth market, even if the labor market is less certain.

On Monday, the Federal Reserve Bank of New York (New York Fed) released its latest Survey of Consumer Expectations, which showed that consumers’ earnings and income growth expectations rebounded while medium-term inflation expectations rose in June. Median expected household income growth rebounded from May’s sudden decline, increasing from 2.4 percent to 2.8 percent, the survey reported. Barring the blip in May, income growth expectations have been trending upward since January.

Likewise, median household spending growth expectations remained steady, at around 3.6 percent, as did perceptions of credit access compared to a year ago were essentially unchanged. However, the perceived probability of missing a minimum debt payment over the next three months continued its recent upward trend by reaching 13.3 percent in June (up from 12.8 percent in May), a level not seen since December 2014.

Meanwhile, the New York Fed reported that median home price expectations decreased by 0.1 percentage point in June to 3.1 percent, remaining within the narrow 3.0-3.2 percent band observed over the last 12 months, but well below average.

More mixed were the trends in inflation and labor. According to New York Fed, expectations about inflation decreased slightly at the one-year horizon (from 2.6 percent in May to 2.5 percent in June), yet increased at the three-year ahead horizon (from 2.7 percent in May to 2.9 percent in June). Also, the uncertainty expressed by respondents regarding future inflation outcomes increased at both the one-year and the three-year ahead horizons and is now at the high end of its range for the past two years.

This coincided with a bipolar perception of the labor market, where the mean perceived probability of losing a current job and finding a job both declined.  The perceived probability of losing one’s job in the next 12 months dropped from 14.9 percent in May to 13.8 percent in June, but the hope of finding a job also decreased, from 21.8 percent to 20 percent. The perceived probability that the U.S. unemployment rate will be higher one year from now, meanwhile, also decreased from 39.1 percent in May to 38.1 percent in June, still above last year’s levels.

Consumer earning confidence, however, could signal a healthier housing market. Nationally, existing home sales are happening at a pace rivaling the pre-recession period, and mortgage rates are still extremely low (and likely staying there). The Federal Reserve last week, in fact, announced that it would wait until U.S. inflation steadied at 2 percent before it raised rates.

About Author: Scott Morgan

Scott Morgan is a multi-award-winning journalist and editor based out of Texas. During his 11 years as a newspaper journalist, he wrote more than 4,000 published pieces. He's been recognized for his work since 2001, and his creative writing continues to win acclaim from readers and fellow writers alike. He is also a creative writing teacher and the author of several books, from short fiction to written works about writing.

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