Bigger. Better. Bolder. Inman Connect is heading to San Diego. Join thousands of real estate pros, connect with the Inman Community, and gain insights from hundreds of leading minds shaping the industry. If you’re ready to grow your business and invest in yourself, this is where you need to be. Go BIG in San Diego!
A closely followed measure of consumer sentiment deteriorated for the fifth month in a row in May and is approaching an all-time low, but the economy continues to do better than it and other surveys might imply, economists say.
The University of Michigan Index of Consumer Sentiment slipped to 50.8 in May, down 3 percent from April and 26 percent from a year ago, according to preliminary data released Friday.
Joanne Hsu
Three-quarters of those surveyed cited tariffs as a cause for concern, and “uncertainty over trade policy continues to dominate consumers’ thinking about the economy,” survey director Joanne Hsu said in a statement.
The survey was fielded between April 22 and May 13, so many responses were gathered before the Trump administration announced a pause on some tariffs on goods from China on May 12.
UofM Index of Consumer Sentiment
Source: University of Michigan Surveys of Consumers, preliminary data for May.
The Consumer Sentiment Index hit an all-time low in records dating to 1978 in June 2022, when inflation as measured by the Consumer Price Index was hitting a post-pandemic high of 9.1 percent.
The Consumer Price Index for April, released Tuesday, showed prices were up 2.3 percent from a year ago last month, closer to the Fed’s 2 percent goal than the 3 percent annual inflation registered in January.
“The Michigan report continues to paint, at face value at least, a grim picture,” Pantheon Macroeconomics Senior U.S. Economist Oliver Allen said in a note to clients.
The Index of Consumer Expectations — which historically has been a better guide to growth in consumers’ real spending — was down 32 percent from a year ago in May, to 46.5 — the lowest reading since 1980, Allen noted.
It’s not just the prospect that tariffs will reignite inflation that has consumers worried. Confidence in the labor market “has taken a heavy blow, with the net share of households expecting higher unemployment remaining around its highest level since the global financial crisis,” Allen said.
There’s little doubt the economy is decelerating — an advance estimate of real gross domestic product (GDP) suggested that the economy shrank by 0.3 percent during the first quarter, thanks to a tariff-driven surge in imports and a decrease in government spending.
But forecasters at Pantheon Macroeconomics suspect consumer surveys — and the University of Michigan survey in particular — paint an “unduly negative” picture of consumer outlook.
Retail sales posted gains in March and April, and “most near-real indicators of consumers’ discretionary spending on services are holding up well,” he said.
Oliver Allen
“Our view is that consumers’ spending will soften as the wave of pre-tariff purchases unwinds, higher prices for imported goods take a bite out of real incomes, and policy uncertainty further undermines hiring and the labor market,” Allen concluded. “But we doubt consumption growth will slow nearly as sharply as the Michigan survey currently implies.”
Surveys by the Mortgage Bankers Association show demand for purchase mortgages has increased for two weeks in a row, as would-be homebuyers responded to growing inventories of listings in many markets and stabilizing interest rates.
Fannie Mae’s latest monthly National Housing Survey, which polled 1,181 household decision makers between April 1 and April 18, found consumer sentiment toward housing was up slightly from March to April.
Source: Fannie Mae National Housing Survey, April 2025.
At 69.2, Fannie Mae’s Home Purchase Sentiment Index (HPSI) was up 1.1 points from March but down nearly three points from a year ago.
Three of the index’s six components improved: Americans were less concerned about losing their jobs than in March, more had seen their incomes increase, and more expected home prices to increase in the next year.
But consumers were more pessimistic about selling conditions and the prospect for mortgage rates to come down in the year ahead.
Source: Fannie Mae National Housing Survey, April 2025.
Only 23 percent of Americans surveyed in April said it was a good time to buy, but that was up from 22 percent in March. The share who said it was a bad time to buy (77 percent) remained unchanged.
The share of consumers who say they would buy a home if they were going to move was unchanged at 65 percent.
The share who said they would rent if they were going to move increased one percentage point from March to April, to 35 percent.
Source: Fannie Mae National Housing Survey, April 2025.
The percentage of household decision makers who said it was a good time to sell fell from 64 percent in March to 58 percent in April.
Source: Fannie Mae National Housing Survey, April 2025.
Only 23 percent of Americans surveyed in April thought home prices would go down in the next 12 months, compared to 25 percent in March.
While that would be bad news for would-be bargain hunters, it’s viewed as a positive for the HPSI as it reflects consumer confidence that housing markets aren’t on the verge of crashing.
Source: Fannie Mae National Housing Survey, April 2025.
About one in four households surveyed in April (26 percent) expect mortgage rates will come down in the next 12 months, about the same as March (27 percent) but down sharply from November, when 45 percent were expecting lower rates in the year ahead.
Source: Fannie Mae National Housing Survey, April 2025.
Only one in four employed Americans (25 percent) said they were concerned about losing their job in April, down from a spike in March to 32 percent.
Source: Fannie Mae National Housing Survey, April 2025.
While not factored into the HPSI, only one in three households (32 percent) thought the economy was on the right track in April, down from 34 percent in March but up from 28 percent a year ago.
Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.
