Consumers Expect Home Prices To Drop, But Credit Tightens

Consumers are showing mixed emotions about the housing and mortgage markets in the coming months. They expect home prices to drop, but feel credit availability will deteriorate.

The New York Fed’s February 2022 Survey of Consumer Expectations shows consumers perceive credit will tighten in the coming months, but expect home prices to decrease by 5.7% over the next 12 months.

Expectations about future credit availability deteriorated considerably, with more respondents expecting it will be harder to receive and substantially fewer respondents expecting it will be easier to obtain credit in the year ahead, the survey found. Perceptions of credit access compared to a year ago also deteriorated, with more respondents finding it harder to obtain credit.

The survey shows median inflation uncertainty — or the uncertainty expressed regarding future inflation outcomes — decreased slightly at the one-year horizon and increased at the three-year horizon. Both measures remain elevated compared to their pre-pandemic levels.

Median one-year-ahead inflation expectations increased to 6.0% in February from 5.8% in January, matching its November 2021 series’ high. The increase was widespread across age, education, and income groups, but largest for the respondents without a high school degree.

On the positive side, consumers are optimistic about unemployment figures. Mean unemployment expectations— or the mean probability that the U.S. unemployment rate will be higher one year from now — decreased to 34.4% from 35.9%. The decline was broad-based across age, education, and income groups.

The Survey of Consumer Expectations is a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads conducted by the New York Federal Reserve Bank. Respondents participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month, according to the New York Fed.