2023 SCE Housing Survey Finds Short-Term Home Price Expectations Drop Sharply; Rental Price Growth Expectations Remain Elevated, Federal Reserve Bank of New York Reports

The Federal Reserve Bank of New York has recently released the 2023 SCE Housing Survey, providing information on consumers’ housing-related experiences and expectations. The results showed that households expect home prices to increase at a record-low pace over the next twelve months, while the cost of rent is likely to increase by over 8%, moderating from last year’s high.

Home Prices/Rents

The survey showed that average one-year-ahead home price growth expectations fell sharply to 2.6% from 7.0% in February 2022, the lowest reading since the series began in 2014. This decline is consistent with data from the core SCE survey, which showed that home price growth expectations declined sharply between May 2022 and November 2022. On the contrary, households’ home price growth expectations for the five-year horizon rose from last year, with expectations of prices to rise by 2.8% per year on average for the next five years.

While households’ rent change expectations moderated, they remain high compared to historical standards and home price growth expectations. On average, families expect the cost of rent to increase by 8.2% over the next 12 months, compared to 11.5% in February 2022. Families expect rent increases to outpace home price increases over the next five years substantially.

Housing Outlook

Attitudes toward housing as a financial investment remained strongly positive, with most households viewing it as an excellent investment. However, the share characterizing housing as a “somewhat good” or “excellent” investment declined slightly from February 2022. Furthermore, the probability of buying a home conditional on a move over the next three years rose overall, driven by higher expectations among current owners.

Homeowners’ expectations about the likelihood of refinancing their mortgage over the next 12 months fell sharply to a new series low. This could reflect higher interest rates or a shift in homeowners’ priorities.

Related Facts

• The SCE Housing Survey has been fielded annually since 2014 and is part of the broader Survey of Consumer Expectations.
• The survey provides information on consumers’ housing-related experiences and expectations.
• The survey shows that household expectations of home price increases over the next 12 months are at a record low.
• Expectations about rental price growth remain elevated compared to historical standards and home price growth expectations.
• The probability of buying a home conditional on a move over the next three years rose overall, driven by higher expectations among current owners.

Key Takeaway

The 2023 SCE Housing Survey reveals that households’ expected home price growth over the next twelve months dropped sharply, but their expectations of rental price growth remain elevated. Although attitudes toward housing as a financial investment remain positive, there is a slight dip in the share of households characterizing it as a “somewhat good” or “excellent” investment. In addition, homeowners’ expectations about the likelihood of a mortgage refinancing are at a new series low, indicating higher interest rates or shifting priorities.

Conclusion

The 2023 SCE Housing Survey provides crucial insights into consumers’ housing-related experiences and expectations. The record-low expected home price increases for the next twelve months and rising rent prices will likely impact the housing market. Households’ positive attitudes toward housing as a financial investment and increasing probability of buying a home could stabilize the market. Nonetheless, it is evident that the housing market is in a transitional phase, and stakeholders must keep a close eye on emerging trends and adjust to future developments accordingly.