The latest monthly data from the University of Michigan’s flagship survey of consumer sentiment found less consumers mentioning interest rates as a barrier to big purchases like homes and cars, while the ongoing government shutdown so far is not having a huge impact on how people view the economy.
At the same time, sentiment fell 2.7% from September to October, with many respondents still worried about inflation, and high prices “at the forefront of consumer’s minds, according to the survey’s director, Joanne Hsu.
“Overall, consumers perceive few material changes in economic circumstances from last month,” Hsu wrote in a statement.
The data comes as the housing market shifts from a disappointing summer to a still uncertain autumn. But the survey affirms what many agents and brokers have seen some evidence of in their markets—that falling interest rates are jumpstarting sales, at least in some regions.
The proportion of consumers mentioning high interest rates as it related to poor buying conditions for homes has fallen almost 10% in two months, to a little over 40% of respondents. While that doesn’t necessarily indicate that prospective buyers feel it is a good time to buy, it shows that consumers are at least aware that the interest rate environment is becoming more favorable.
Hsu noted that only 2% of respondents “spontaneously” referred to the government shutdown in the survey, compared to 10% who did so during the last government shutdown in 2019.
While the connection between consumer sentiment and home sales is not as clear as it might seem, brokers and housing economists have continued to attribute lackluster home demand at least partially to economic worries. Tariffs and inflation—while not as big of a factor now as they were six months ago—continue to weigh on people, with the survey finding most people still expect inflation to worsen in the coming months.
Predictions for slightly higher inflation—with year ahead expectations rising from 3.7% to 3.9%—was driven by Republicans and Independents, Hsu said.
