As inflation concerns hit their highest levels in recent years, American consumers are increasingly worried about housing costs and interest rates, according to a new study issued by TransUnion.

The financial services company’s Q2 2024 Consumer Pulse Study found that nearly half Americans rank housing prices and interest rates among their top three financial concerns despite slightly easing overall inflation.

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The report, which studied shifting consumer attitudes and behaviors based on income, debt, and other parameters, found that 47% of respondents cited housing prices as a major worry, while 46% expressed concern about interest rates. The figures, while lower than anxiety over everyday inflation, further confirm the persistent challenges in the housing market.

"The combination of these concerns may have resulted in fewer consumers planning to seek mortgages in the coming year," the report said. Only 14% of those planning to apply for new or refinance existing credit in the next 12 months said they would apply for a mortgage, down from 21% in the same quarter last year.

The deterioration of consumer sentiment comes against the backdrop of a cooling new-home sales market. The U.S. Census Bureau reported Wednesday that new-home sales in May fell to a seasonally adjusted annual rate of 619,000, a 16.5% year-over-year drop and 11.3% below April’s revised rate. 

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The supply of new homes has risen to 9.3 months at the current sales pace, up from 6.9 months a year ago. This indicates that sellers are trying to offload properties, but buyers are deterred by high home values and borrowing costs.

Real estate agency Bright MLS reported that 481,000 new homes were available in May — the highest inventory since January 2008 — while median prices dipped slightly to $417,400 from over $433,000 just two months prior, a nearly 3% decline that suggests builders may be feeling pressure to adjust pricing in the face of accumulating inventory.

"While we anticipated price growth in 2024, the record highs also bring challenges," Bright MLS chief economist Lisa Sturtevant said in a company statement. "Buyers on the fence of affordability must move to the sidelines. However, more choices are coming online for those who can persist, and market conditions should ease in the second half the year."

Despite the immediate market challenges, the TransUnion study found that consumer financial outlook remained relatively steady. Over half (55%) of consumers expressed optimism about their household finances for the next 12 months, with younger generations showing the most positive outlook.

However, the study also found that consumers are increasingly using credit cards to make ends meet. A record 59% of those planning to apply for new credit in the next year intend to apply for a new credit card, the highest level TransUnion has measured since beginning to track the metric.

As the Federal Reserve continues its efforts to combat inflation, the housing market’s trajectory remains uncertain with just one expected rate cut this year. With mortgage rates hovering around 7%, potential homebuyers and builders are feeling the squeeze. 

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