Americans are once again bracing for another round of higher housing costs, the New York Federal Reserve said on Monday.
As part of its latest Survey of Consumer Expectations, the regional Fed bank found that respondents see higher near-term increases for both rent and home prices, although they do see some relief over the longer haul for home prices. Households also see no relief on home borrowing costs.
The New York Fed said that in February respondents predicted home prices would rise 5.1% a year from now, up from the 2.6% they predicted a year ago. But five years from now, respondents see home prices up by 2.7%, from 2.8% in last year's poll.
On the rental front, respondents reckon costs a year from now will be up 9.7%, the second-highest reading in the survey's history, from 8.2% in the poll done in February 2023. Five years from now, survey respondents see rent "essentially flat," the New York Fed said, at 5.1%.
The report found that respondents still have a "strongly positive" outlook on housing as an investment. They also expect mortgage rates, already high, to go higher. Respondents predict the average mortgage rate a year from now will be at 8.7% and will be at 9.7% in three years, with both readings at record levels.
The New York Fed report suggests that the U.S. central bank could face fresh challenges getting inflation back down to its 2% target with the expected cost of housing still rising robustly. The Fed has been vexed by unexpectedly strong price pressures in the first months of this year, bringing into question whether it will be able to cut interest rates in 2024. High mortgage rates related to Fed policy have deeply chilled activity in the housing market.
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