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Expected Home Price Increases Accelerate over the Short Term but Remain Stable over the Medium Term

The Federal Reserve Bank of New York’s 2022 SCE Housing Survey shows that expected changes in home prices in the year ahead increased relative to the…

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The Federal Reserve Bank of New York’s 2022 SCE Housing Survey shows that expected changes in home prices in the year ahead increased relative to the corresponding timeframe in the February 2021 survey, while five-year expectations remained unchanged. Households reported that they would be less likely to buy if they were to move compared to the year-ago survey, marking the first annual decline since the series began in 2014. This drop was driven by current renters, who were much less likely to buy compared to renters in the 2021 survey. Renters also reported that they expect rents to be sharply higher twelve months from now, with the expected rate of increase more than twice that reported a year ago. The expected price of rent five years ahead also rose compared to expectations a year ago, but at a more moderate pace. 

The SCE Housing Survey

This latest survey marks the ninth installment of the annual SCE Housing Survey, which has been fielded every February since 2014 and is part of the broader Survey of Consumer Expectations. The 2022 survey includes 1,242 respondents, about one-quarter of whom are current renters while the remaining three-quarters are homeowners. Results are presented in the SCE Housing Survey interactive web feature, which shows time trends for variables of interest for the overall sample as well as for various demographic groups, including separate splits for owners and renters. For further information on the SCE, please refer to an overview of the survey methodology, the interactive chart guide, and the survey questionnaire.

The primary goal of the SCE Housing Survey is to provide rich, high-quality information on consumers’ experiences, behavior, and expectations related to housing. The survey collects data on households’ perceptions and expectations for changes in home prices and rents, as well as their intentions regarding moving and buying in the future, perceptions of mortgage rates, and the ease of obtaining a mortgage. The survey also elicits preferences for owning and renting, and contains geographic information to study variation in responses.

One-Year Home Price Expectations Accelerate, Five-Year Expectations Unchanged

Survey respondents estimated the value of a typical home in their zip code and reported their expected value of that home in one and five years. The evolution of home price expectations, annualized at the five-year horizon, is shown in the chart below.

Households Expect Strong Home Price Growth in the Short Term

Source: SCE Housing Survey.

The expected change in home prices over the next year rose relative to twelve months earlier, with households expecting home prices in their zip code to rise by 7.0 percent on average, compared to 5.7 percent in February 2021. This increase, despite an increase in mortgage rates nationally since summer 2021, reflects strong momentum in home prices over the past eighteen months. In contrast, five-year expectations remained unchanged, with households expecting an annualized growth rate of 2.2 percent. The divergence in one- and five-year expectations suggests that households foresee strong home price growth in the short term, but that prices will moderate in the longer term.

The divergence in households’ one- and five-year home price expectations was broad-based across age and education groups but was most pronounced for households with annual income of less than $60,000. Despite significant outward migration from urban centers since the onset of the pandemic (Ramani and Bloom, 2021), urban and rural households reported similar home price expectations over the short and medium term. We also found no major differences in the short- and medium-term home price expectations between owners and renters.

The divergence of one-and five-year home price expectations is consistent with households expecting mortgage rates to continue to increase in the near term. We asked respondents what they thought the average mortgage interest rate on a thirty-year fixed-rate mortgage was today, and what they thought it will be in one and three years. Respondents reported higher one- and three-year expected mortgage rates relative to pre-pandemic levels. The expected 8.23 percent rate in three years is the highest level in the series’ nine-year history.

Average Perceived National Mortgage Rate

 Feb 2020 Feb 2022
Today 5.88 5.86
In one year 6.06 6.68
In three years 7.13 8.23
Source: SCE Housing Survey.

To assess whether the expected slowdown in home prices over the medium term is due to a shift in attitudes regarding the attractiveness of housing as an investment, we asked respondents how likely they would be to buy as opposed to renting if they were to move over the next three years. Households also reported that they would be less likely to buy if they were to move compared to a year ago. This was the first annual decline in this series since the survey began in 2014, and was driven by current renters, who were about 10 percentage points less likely to buy compared to renters in the February 2021 survey. We also asked respondents how they viewed the attractiveness of housing as an investment relative to other financial investments. The fraction stating that housing is a “good” or “very good” investment fell slightly to 71.0 percent, compared to its series high of 73.6 percent in February 2021.

Renters Are Less Likely to Buy if They Were to Move in Next Three Years

Source: SCE Housing Survey.

Renters Becoming More Pessimistic about Housing Market as Expected Rents Spike

To understand why renters report being less likely to buy if they were to move, we asked how changes in home prices over the past year have affected their housing plans. Twenty-two percent of households reported that they had planned to purchase a home but now view renting as a better financial decision. About 13 percent of respondents stated that the recent increase in home prices had prompted them to speed up their search to purchase a home over the past year. However, the majority of respondents either preferred to rent (36 percent) or said they were waiting for prices to come down before buying (42 percent). We also asked renters how likely it was that they would own a home at some point in the future. The average likelihood fell below 50 percent for the first time in the series’ history.

Renters See a Lower Likelihood of Ever Owning a Home

Source: SCE Housing Survey.

If renters previously on the margin of purchasing a home no longer find homeownership as appealing, a key question becomes how are expectations of rental prices evolving? We asked respondents to estimate the rental value of a typical home or apartment in their zip code, and what they think the rent will be one and five years from today.

Households Expect Large Rent Increases in the Short Term

Source: SCE Housing Survey.

Households expect a sharp rise in rents over the next twelve months: on average, respondents expect rents to increase by 11.5 percent, compared to 6.6 percent in the February 2021 survey. This increase was even more pronounced among current renters, who expect rents to rise by 12.8 percent one year from now compared to 5.9 percent one year ago. This is consistent with the idea that short-term rent expectations are being shaped by the sharp increases in rent that have occurred in recent months. The expected price of rent five years from now rose to an annualized increase of 5.2 percent, compared to 4.4 percent a year ago.

Finally, we are also releasing a chart packet that describes our sample and presents summary statistics for many more questions that were asked in the survey. This year’s survey also included special modules on climate change and evictions, which we will write about in the near future.

Fatima-Ezzahra Boumahdi is a senior research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.

Leo Goldman is a senior research analyst in the Bank’s Research and Statistics Group.

Andrew Haughwout is a senior vice president in the Bank’s Research and Statistics Group.

Ben Hyman is an economist in the Bank’s Research and Statistics Group.

Haoyang Liu is a senior research economist at the Federal Reserve Bank of Dallas.

Jason Somerville is an economist in the Bank’s Research and Statistics Group.


Disclaimer
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

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International

The next pandemic? It’s already here for Earth’s wildlife

Bird flu is decimating species already threatened by climate change and habitat loss.

I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.

I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.

This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.

How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.

This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.

This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.

H5N1 originated on a Chinese poultry farm in 1997. ChameleonsEye/Shutterstock

The first signs

Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.

We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.

Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.

Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.

Unfortunately, our warnings were correct.

A roving sickness

Two decades on, bird flu is killing species from the high Arctic to mainland Antarctica.

In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.

Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.

The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.

Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.

At the crossroads

Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.

Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.

It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.

Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.

Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.

A colony of king penguins.
Remote penguin colonies are already threatened by climate change. AndreAnita/Shutterstock

How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.

To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.

Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked…

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked by the NY Fed Consumer Survey extended their late 2023 slide, with 3Y inflation expectations in January sliding to a record low 2.4% (from 2.6% in December), even as 1 and 5Y inflation forecasts remained flat, moments ago the NY Fed reported that in February there was a sharp rebound in longer-term inflation expectations, rising to 2.7% from 2.4% at the three-year ahead horizon, and jumping to 2.9% from 2.5% at the five-year ahead horizon, while the 1Y inflation outlook was flat for the 3rd month in a row, stuck at 3.0%. 

The increases in both the three-year ahead and five-year ahead measures were most pronounced for respondents with at most high school degrees (in other words, the "really smart folks" are expecting deflation soon). The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at all horizons, while the median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one- and three-year ahead horizons and remained unchanged at the five-year ahead horizon.

Going down the survey, we find that the median year-ahead expected price changes increased by 0.1 percentage point to 4.3% for gas; decreased by 1.8 percentage points to 6.8% for the cost of medical care (its lowest reading since September 2020); decreased by 0.1 percentage point to 5.8% for the cost of a college education; and surprisingly decreased by 0.3 percentage point for rent to 6.1% (its lowest reading since December 2020), and remained flat for food at 4.9%.

We find the rent expectations surprising because it is happening just asking rents are rising across the country.

At the same time as consumers erroneously saw sharply lower rents, median home price growth expectations remained unchanged for the fifth consecutive month at 3.0%.

Turning to the labor market, the survey found that the average perceived likelihood of voluntary and involuntary job separations increased, while the perceived likelihood of finding a job (in the event of a job loss) declined. "The mean probability of leaving one’s job voluntarily in the next 12 months also increased, by 1.8 percentage points to 19.5%."

Mean unemployment expectations - or the mean probability that the U.S. unemployment rate will be higher one year from now - decreased by 1.1 percentage points to 36.1%, the lowest reading since February 2022. Additionally, the median one-year-ahead expected earnings growth was unchanged at 2.8%, remaining slightly below its 12-month trailing average of 2.9%.

Turning to household finance, we find the following:

  • The median expected growth in household income remained unchanged at 3.1%. The series has been moving within a narrow range of 2.9% to 3.3% since January 2023, and remains above the February 2020 pre-pandemic level of 2.7%.
  • Median household spending growth expectations increased by 0.2 percentage point to 5.2%. The increase was driven by respondents with a high school degree or less.
  • Median year-ahead expected growth in government debt increased to 9.3% from 8.9%.
  • The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.6 percentage point to 26.1%, remaining below its 12-month trailing average of 30%.
  • Perceptions about households’ current financial situations deteriorated somewhat with fewer respondents reporting being better off than a year ago. Year-ahead expectations also deteriorated marginally with a smaller share of respondents expecting to be better off and a slightly larger share of respondents expecting to be worse off a year from now.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.4 percentage point to 38.9%.
  • At the same time, perceptions and expectations about credit access turned less optimistic: "Perceptions of credit access compared to a year ago deteriorated with a larger share of respondents reporting tighter conditions and a smaller share reporting looser conditions compared to a year ago."

Also, a smaller percentage of consumers, 11.45% vs 12.14% in prior month, expect to not be able to make minimum debt payment over the next three months

Last, and perhaps most humorous, is the now traditional cognitive dissonance one observes with these polls, because at a time when long-term inflation expectations jumped, which clearly suggests that financial conditions will need to be tightened, the number of respondents expecting higher stock prices one year from today jumped to the highest since November 2021... which incidentally is just when the market topped out during the last cycle before suffering a painful bear market.

Tyler Durden Mon, 03/11/2024 - 12:40

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Spread & Containment

A major cruise line is testing a monthly subscription service

The Cruise Scarlet Summer Season Pass was designed with remote workers in mind.

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While going on a cruise once meant disconnecting from the world when between ports because any WiFi available aboard was glitchy and expensive, advances in technology over the last decade have enabled millions to not only stay in touch with home but even work remotely.

With such remote workers and digital nomads in mind, Virgin Voyages has designed a monthly pass that gives those who want to work from the seas a WFH setup on its Scarlet Lady ship — while the latter acronym usually means "work from home," the cruise line is advertising as "work from the helm.”

Related: Royal Caribbean shares a warning with passengers

"Inspired by Richard Branson's belief and track record that brilliant work is best paired with a hearty dose of fun, we're welcoming Sailors on board Scarlet Lady for a full month to help them achieve that perfect work-life balance," Virgin Voyages said in announcing its new promotion. "Take a vacation away from your monotonous work-from-home set up (sorry, but…not sorry) and start taking calls from your private balcony overlooking the Mediterranean sea."

A man looks through his phone while sitting in a hot tub on a cruise ship.

Shutterstock

This is how much it'll cost you to work from a cruise ship for a month

While the single most important feature for successful work at sea — WiFi — is already available for free on Virgin cruises, the new Scarlet Summer Season Pass includes a faster connection, a $10 daily coffee credit, access to a private rooftop, and other member-only areas as well as wash and fold laundry service that Virgin advertises as a perk that will allow one to concentrate on work

More Travel:

The pass starts at $9,990 for a two-guest cabin and is available for four monthlong cruises departing in June, July, August, and September — each departs from ports such as Barcelona, Marseille, and Palma de Mallorca and spends four weeks touring around the Mediterranean.

Longer cruises are becoming more common, here's why

The new pass is essentially a version of an upgraded cruise package with additional perks but is specifically tailored to those who plan on working from the ship as an opportunity to market to them.

"Stay connected to your work with the fastest at-sea internet in the biz when you want and log-off to let the exquisite landscape of the Mediterranean inspire you when you need," reads the promotional material for the pass.

Amid the rise of remote work post-pandemic, cruise lines have been seeing growing interest in longer journeys in which many of the passengers not just vacation in the traditional sense but work from a mobile office.

In 2023, Turkish cruise line operator Miray even started selling cabins on a three-year tour around the world but the endeavor hit the rocks after one of the engineers declared the MV Gemini ship the company planned to use for the journey "unseaworthy" and the cruise ship line dealt with a PR scandal that ultimately sank the project before it could take off.

While three years at sea would have set a record as the longest cruise journey on the market, companies such as Royal Caribbean  (RCL) (both with its namesake brand and its Celebrity Cruises line) have been offering increasingly long cruises that serve as many people’s temporary homes and cross through multiple continents.

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