Addressing Home Price Expectations

Consumer expectations on home price changes declined to their lowest level during the year, according to the latest Survey of Consumer Expectations released by the Federal Reserve Bank of New York. The monthly survey which published its findings for November revealed that while there was little change in the short- to medium-term inflation expectations, consumers were generally more pessimistic about their expectations on housing and the labor market.

In fact, the survey found that home price change expectations, which had made solid gains in the first half of the year and risen steadily to a high of 3.9 percent in June, fell to their lowest point during the year to 3.1 percent in November. The survey said that this decline was consistent across all regions except the Midwest.

Despite a strong jobs market, the median one-year-ahead earnings growth expectations also saw a sharp decline for the second straight month falling to 2 percent from 2.5 percent in October and reaching its lowest level since February. The decrease was most pronounced among respondents living in the Northeast and West and those in the age group of 60 years and older.

However, the decline in earnings growth expectations was offset by median expected household income growth increasing to 3 percent from 2.9 percent in October to match the previous series high, the survey noted. In a trend that has been consistent since March, consumer expectation on the year-ahead changes in taxes at current income level also inched up to 2.7 percent.

On the other hand, the perceived change in credit availability worsened slightly when compared to a year ago, the survey revealed. The proportion of respondents who reported easier credit access fell to 26 percent from 26.6 percent in October, even though the expectations for year-ahead credit availability remained stable.

Yet, consumers remained confident about paying their debts with the average perceived probability of missing a minimum debt payment over the next three months declining to 12 percent in November.

Read the full survey here.