U.S. consumers expect home prices, rents to rise sharply next year

With headline consumer price inflation at its highest in four decades, U.S. households are anticipating year ahead home prices and rents to rise at an even faster pace than they expected in 2021, according to the New York Federal Reserve’s Survey of Consumer Expectations.

The mean expected change in home prices was 7.0% at the one-year horizon, 1.3 percentage points above last year’s print of 5.7%, and the highest level since the survey started in 2014, the survey showed. Still, expectations for five years ahead were unchanged from the previous year, suggesting that households see slowing price growth after next year. Consumers expect home prices to rise by just 2.2% per year on average for the next five years.

Rent appears to be more of a concern for households, with expectations for 11.5% growth over the next year vs. 6.6% in Feb. 2021. Over the next five years, households expect annual rent increases of 5.2%, up from 4.4% a year ago, the survey noted.

With mortgage rates at the highest since 2018, the average expected probability of purchasing a home if the household were to move within the next three years fell sharply to 60.7% from 68.5% last year, marking the first reduction in the series. Similarly, renters’ probability of owning a home in the future fell to 43.3% in 2022 from 51.5% in 2021, the lowest reading since 2014.

In mid-April, Consumer sentiment jumped unexpectedly in April.