Americans Face Another Increase in Housing Costs, According to New York Federal Reserve

The New York Federal Reserve said on Monday that Americans are once again poised to experience another increase in housing costs.

In its latest survey of consumer expectations, the regional Fed bank found that respondents expect larger near-term increases in rents and home prices, although they see some long-term relief for house prices. Families are also seeing no relief when it comes to mortgage costs.

The New York Fed said respondents in February expected home prices to rise 5.1% a year from now, up from 2.6% a year ago. But in five years, respondents predict an increase of 2.7%, compared to 2.8% in last year’s survey.

When it comes to rent, respondents estimate that costs in one year will be up 9.7%, the second highest value in the history of the survey, compared to 8.2% in his study that was to be done in February 2023. In five years, survey respondents expect rent to be available. to be “basically stable,” according to the New York Fed, at 5.1%.

The report says respondents still have a “very positive” view of housing as an investment. They also expect already high mortgage rates to rise. Respondents predict that the average mortgage rate will be 8.7% in one year and 9.7% in three years, both of which will reach record levels.

The New York Fed report suggests that the US central bank may have more difficulty in bringing inflation back to its 2% target, as the expected cost of housing continues to rise sharply . The Fed has been troubled by unexpected price pressures in the early months of this year, raising questions about its ability to cut interest rates in 2024. High mortgage rates associated with Fed policy have to seriously cool down activity in the housing market. (Reporting by Michael S. Derby; Editing by Paul Simao)