Despite a spate of reports showing the cost of housing increasing, consumers have a slightly rosier view of future home-price growth.
That’s according to a new consumer survey from the Federal Reserve that shows respondents believe that home-price growth will be 3%. That’s down from 3.3% in last month’s survey and back to the 12-month trailing average.
Looking further into the future, the Fed’s survey shows that consumers expect the median home-price growth on a three-year timeline will rise by 4.5%.
The consumer expectations of home-price growth is perfectly in line with the May CoreLogic home price index. That report showed home prices growing 4.9% year over year, but the company’s forecast is that home prices will grow over the next year by 3%, the exact expectation for consumers polled in The Fed’s survey.
Redfin’s monthly housing market report showed a 5% year-over-year jump in median prices but a 6.1% jump in asking prices.
Respondents also have a rosier view of the future of inflation. The median one-year inflation expectation declined 0.2 percentage points to 3%, while the five-year expectation fell slightly to 2.8%. However, the three-year inflation expectation grew by 0.1% percentage point to 2.9%.
This could indicate that consumers are starting to notice inflation normalizing. In June of 2022, the inflation rate hit 9%, but as interest rates rose, the inflation rate came down. It now sits at 3.3%, something more in line with historical averages.
The survey showed consumers’ other positive expectations. The median one-year expected income growth increased by 0.3 percentage points to 3%, which is above the 12-month trailing average of 2.8%. That’s the highest since September.
The median household spending growth expectation rose modestly to 5.1%, but more respondents said they are worse off financially than they were a year ago.