To almost no one’s surprise, 40-year high inflation is stifling consumer spending on everything from repairs to buying a home, according to the latest Freddie Mac poll…(Freddie Mac)
- 96% of respondents indicated that price increases in the past 12 months have impacted their household spending.
- 84% of respondents said they are concerned about an impending economic recession with 51% of respondents very concerned and 33% somewhat concerned.
Borrowing more, saving less. Respondents reported putting less money toward savings, delaying essential and non-essential repairs or improvements to their property, and increasing spending on credit cards to cover expenses because of higher prices.
Impact on housing. Even though nearly 60% of renters saw their rent increase last year and over half saw an increase of over 10%, rising prices and rates have caused protentional buyers to pull back.
- 76% of protentional buyers said rising rents and rates were the reason they were less likely to buy a home with 44% citing prices and 32% citing rates.
- 29% say the inability to save for a down payment.
The good news is that nearly 7-in-10 renters said their wage increase was sufficient to cover their increased rent. However, the bad news is that 57% believe they are extremely or somewhat likely to miss a rent payment in the future.
This is just basic economics. When prices rise, particularly on essential products, it’s going to squeeze out non-essential items. The good news for consumers is many pundits have said the worst may be behind us. However, just because prices aren’t rising doesn’t mean they are going to fall. This means wages will have to rise which could be problematic as 58% of respondents in a new Harris poll believe companies have more leverage in the job market these days.
Things could be worse. We could be Britain…