Economic Sentiment Falters, Driven By Concerns Over Housing Affordability
Economic sentiment fell over the last two weeks, marking the fifth decline out of the last six readings. The HPS-CivicScience Economic Sentiment Index (ESI) decreased 0.7 points to 36.0.
All but one of the ESI’s five indicators decreased this week. Confidence in buying a new home declined the most, falling 1.7 points to 20.7, a new record low.
— Confidence in making a major purchase fell 1.4 points to 21.0.
— Confidence in finding a new job fell 0.6 points to 50.1.
— Confidence in the U.S. economy fell 0.4 points to 34.5.
The only indicator to improve was confidence in personal finances, which rose 0.4 points to 53.5.
Last week, Goldman Sachs analysts raised their projected probability of recession to 15% in the next 12 months and 35% within the next 24 months. The heightened risk is attributed to expectations that the Fed will further raise interest rates as a means of reining in inflation and cooling the economy.
New data released this week showed average national home prices reached an all time high in February, increasing 19.8% year over year. Fortune reported last week that homebuyers paid 20% more for a standard 30-year mortgage than homebuyers in January and 38% more than a year ago.
Homebuyers are flocking to smaller cities with lower costs of living, a sign that housing affordability is becoming a higher priority. The Rapid City, South Dakota metro area ranked highest in the Wall Street Journal’s emerging housing markets index for Q1 2022.
The ESI’s three-day moving average began this two-week stretch at 37.9 on April 13. It hit its two-week high of 38.3 on April 17, its low of 33.6 on April 21, and closed the session at 35.2 on April 26.
The next release of the ESI will be Wednesday, May 11, 2022.