Consumer expectations for the housing market are showing a slightly more positive outlook for the U.S. economy, according to the Federal Reserve Bank of New York’s Center for Microeconomic Data June 2015 Survey of Consumer Expectations (SCE) released on Monday.
The SCE contains information about how consumers expect overall inflation and prices for housing, food, gas, and education to behave. It also provides insight into Americans’ views about job prospects and earnings growth and their expectations about future spending and access to credit.
The SCE also provides measures of uncertainty in expectations for the main outcomes of interest. Expectations are also available by age, geography, income, education, and numeracy.
The survey found that home price change expectations rose to 3.5 percent, their highest level this year, and median earnings growth as well as household spending growth expectations increased from the prior month. Median consumer inflation expectations at both the short and medium term horizon continue to be stable, while labor market expectations also continued to improve and credit availability expectations were largely unchanged.
According to the New York Fed, median home price change expectations rose from 3.3 percent in May to 3.5 percent in June, its highest reading this year, but still below the 2014 average of 3.8 percent. The survey credits southern respondents as the cause for the rise in median home price expectations. On the other hand, median home price uncertainty declined from 3.6 percent in May to 3.1 percent in June, the lowest reading since the survey began.
Median household income growth expectations remained steady at 2.9 percent, with an increase for younger household heads but a decline for household heads in the 40-60 age range, the survey said. Household spending expectations rose from 4 percent in May to 4.3 percent in June, their second-highest reading this year. Spending expectations rose for all age and income groups.
Perceived change in credit availability compared to a year ago was largely unchanged from the previous month, the New York Fed said. Year-ahead expected credit availability continues to improve with 33 percent of consumers expecting credit availability to be much or somewhat harder a year from now compared to today.
Earnings growth expectations rose from 2.3 percent in May to 2.5 percent, their second highest reading this year, the survey determined. The increase in earnings growth expectations was prevalent across all demographic groups, but especially notable for lower education and lower income workers. The mean perceived probability of losing one’s job rose slightly from the series low of 13.8 percent in May to 14 percent in June, its second-lowest level since July 2013. The mean perceived probability of leaving one’s job voluntarily rose to 20.3, and the mean perceived probability of finding a job in the next three months jumped to 55.6 percent, nearly as high as the series high of 55.7 percent reached in March this year.
Last week, Fannie Mae’s June 2015 National Housing Survey found that consumer attitudes toward the current condition of the home selling market and future home rental prices may launch purchase activity forward for the rest of 2015. Optimism among consumers about the housing market has reached new survey highs and strong job and income growth are making consumers appear more favorable in the selling market, indicating a possible increase in the existing home supply.
“Our June survey results show the positive impact on housing of job and income growth,” said Doug Duncan, SVP and chief economist at Fannie Mae. “The expectation of higher rents is a natural outgrowth of increasing household formation by newly employed individuals putting upward pressure on rental rates. A complementary rise in the good time to sell measure suggests that limited inventory, which is putting upward pressure on house prices, gives an increasing advantage to sellers. Together, these results point to a healthier home purchase market, with more renters likely to find owning to be more cost-effective than renting and more sellers likely to put their homes on the market.”
Click here to view the Federal Reserve Bank of New York's June 2015 Survey of Consumer Expectations.