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Inflation is at a 40-year high, and Americans don’t expect any pocketbook relief in the next year with one notable exception: housing prices.
Americans think inflation will hover at 6% a year from now, according to the November New York Fed Survey of Consumer Expectations published Monday. That’s just 0.8 percentage points below the current annual rate of inflation according to the latest Consumer Price Index report.
But when it comes to home prices a year from now, Americans lowered their expectations.
Last month they forecast that median homes prices would be 5% higher than they are now by November 2022. While in October they said median home prices would be 5.6% higher in a year. Before the pandemic, consumers forecast more modest housing price growth, 3%, in the year ahead, according to New York Fed data.
“The decrease was driven by respondents without a college degree and was largest for those who live in the ‘South’ and ‘Northeast’ Census regions,” a statement on the report published by the New York Fed stated.
This comes as the Federal Reserve is contemplating an interest rate hike aimed at curbing inflation. That in turn would result in higher mortgage rates which would decrease homeownership demand and increase demand for rental housing.
This view is echoed in year-ahead forecasts published by the Mortgage Bankers Association, an industry trade group.
In the first quarter of 2022, the group forecasts median existing home prices will hover around $363,900. But by the fourth quarter, it forecast median existing home prices will fall to $358,700 — a nearly 1.5% drop.
Already, there are early signs these forecasts could pan out.
The latest CoreLogic Case-Shiller 20-city price index found that year-over-year home price growth declined to 19.1% in September from 19.6% in August.
