Spring housing season sputters as mortgage rates climb and consumers pull back
Consumer confidence fell to another record low as Americans reported growing concerns about inflation, gasoline prices and their ability to afford major purchases.
The spring home-buying season — typically the busiest stretch of the year for the U.S. housing market — is turning into a disappointment as higher mortgage rates, rising gasoline prices and worsening consumer confidence weigh on household budgets.
According to data from the National Association of Realtors, existing-home sales edged up just 0.2% in April from March to a seasonally adjusted annual rate of roughly 4.02 million homes, well below expectations from economists who had anticipated a stronger spring rebound.
The sluggish performance comes during what is usually the most active home-selling period of the year. Spring sales normally account for roughly four out of every 10 home transactions in the United States.
Instead, buyers are confronting renewed affordability pressures after mortgage rates moved sharply higher again.
According to the Associated Press, the average 30-year fixed mortgage rate climbed to 6.38% last week from 6.22% a week earlier, marking the highest level in more than six months. Fifteen-year mortgage rates also rose, climbing to 5.75% from 5.54%.
Economists and market analysts have linked the rate increases to rising Treasury yields fueled partly by inflation fears connected to renewed tensions involving Iran and higher global oil prices.
For consumers, the impact can be immediate and painful.
Even a modest rise in mortgage rates can add hundreds of dollars to a monthly housing payment, pricing some buyers out of the market entirely and forcing others to delay purchases.
Affordability Watch
Higher mortgage rates are arriving at the same time many Americans are already struggling with rising costs for gasoline, groceries, insurance and travel.
The result appears to be a growing sense of financial strain across the economy.
The University of Michigan’s preliminary consumer sentiment index for May fell to 48.2 from 49.8 in April, according to reporting from Bloomberg. Economists had expected a reading closer to 49.7.
The latest figure marks another record low for consumer sentiment and reflects deepening worries about inflation and household finances.
Survey respondents cited rising gasoline prices, inflation and deteriorating buying conditions as key concerns.
Weak consumer sentiment is increasingly showing up in spending data.
The Associated Press reported that retail sales fell 0.2% in January and were essentially flat in December, extending a broader slowdown that began in the second half of last year.
Retailers are seeing consumers become more selective with spending.
Walmart has continued attracting shoppers looking for lower prices and faster delivery, while Target has reported weaker sales and profits as more consumers focus spending on necessities instead of discretionary purchases.
Travel costs add another pressure point
Travel is also becoming more expensive as airlines grapple with surging fuel costs.
According to reporting from CNBC citing Department of Transportation data, U.S. airlines spent 56.4% more on jet fuel in March than in February, with costs jumping from $3.23 billion to $5.06 billion.
Airlines have warned investors that travelers are likely to absorb those higher costs through increased fares over the next several years.
The pressure has already rattled weaker carriers.
Spirit Airlines collapsed over the weekend after failing to emerge from bankruptcy on schedule, with rising jet fuel costs cited as a major factor.
For consumers, the combination of elevated borrowing costs, persistent inflation and rising travel expenses is creating a difficult financial environment at a time when many households had hoped for relief.
Housing analysts say the direction of mortgage rates over the summer could determine whether the market stabilizes later this year — or whether the weak spring season becomes the start of a broader slowdown in consumer spending and economic activity.