Survey finds housing costs and interest rates weighing on consumers' minds
American consumers are growing increasingly nervous about housing costs and interest rates as inflation fears reach their highest level in recent years, according to a new survey released by TransUnion.
Nearly half of Americans rank home prices and interest rates as their top three financial concerns, despite overall inflation easing slightly, according to the financial services company's Q2 2024 Consumer Pulse Survey.
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The report, which examined changes in consumer attitudes and behavior based on income, debt and other factors, found that 47% of respondents cited home prices as their main concern, while 46% expressed concern about interest rates. While these figures are lower than everyday fears about inflation, they provide further evidence of persistent challenges in the housing market.
“These combined concerns may have led fewer consumers to plan to take out a mortgage next year,” the report said. Among those who plan to apply for a new loan or refinance an existing loan in the next 12 months, just 14% said they would apply for a mortgage, down from 21% a year earlier.
The deterioration in consumer confidence comes as the new home sales market slows. The U.S. Census Bureau said Wednesday that new home sales fell to a seasonally adjusted annual rate of 619,000 in May, down 16.5% from a year earlier and 11.3% below the revised April figure.
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At the current sales pace, the supply of new homes has risen to 9.3 months from 6.9 months a year ago, suggesting that sellers are looking to offload properties while buyers are being deterred by high home prices and borrowing costs.
Real estate firm BrightMLS reported that there were 481,000 new homes available for sale in May, the highest inventory since January 2008. Meanwhile, the median price fell slightly to $417,400 from more than $433,000 just two months earlier, a drop of about 3 percent, suggesting that homebuilders may be feeling pressure to adjust prices in the face of a buildup of inventory.
“We had expected prices to rise in 2024, but record high prices also pose challenges,” Bright MLS chief economist Lisa Sturtevant said in a statement from the company. “Buyers who are unsure whether they can purchase will need to stay on the sidelines. However, buyers who persist will have more options available online and market conditions should ease later in the year.”
Despite immediate market challenges, TransUnion's survey found that consumers' financial outlook remains relatively stable: More than half (55%) of consumers are optimistic about their household finances over the next 12 months, with younger generations expressing the most optimistic outlook.
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But the survey also found that consumers are increasingly turning to credit cards to cover living expenses: Among those who plan to apply for new loans in the next year, 59% plan to apply for a new credit card, a record high, the highest level since TransUnion began tracking the metric.
The housing market remains uncertain as the Federal Reserve continues to fight inflation, with only one interest rate cut expected this year. With mortgage rates hovering around 7%, home buyers and home builders are feeling the squeeze.
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The article Survey Finds Housing Costs, Interest Rates Weigh on Consumers' Minds originally appeared on Benzinga.com.
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