Many consumers continue to prepare for an economic recession despite predictions that the U.S. is headed for a soft landing, according to a recent survey.
Some Americans (40%) said that fears of an economic slowdown motivated them to monitor spending more closely and 31% said they are limiting their discretionary spending to prepare, the CD Valet survey said.
Additionally, 24% said they are delaying purchasing big ticket items to save money. This level of caution also applied to investing, with 41% of adults stating they are more likely to consider a long-term savings investment versus a year ago.
The findings come even as the odds of the U.S. slipping into an economic recession have recently fallen. According to a USA Today article, Moody's Analytics' forecast for a slowdown in the U.S. economy has dropped to 33% from 50%. The improved optimism over where the economy is heading is because economic and job growth have remained resilient despite the Federal Reserve's aggressive monetary policy. The central bank has raised rates 11 times since 2022 to bring inflation down to a 2% target rate.
"Consumers are receiving conflicting information about a possible recession, so it's understandable that they're taking caution when it comes to their financial decisions and prioritizing their savings," Howie Wu, the head of product and general manager of CD Valet said. "But they shouldn't be confused about the smart and safe savings options they can choose today without leaving money on the table - particularly with interest rates continuing to rise."
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Some homebuyers, however, were counting on a recession to find relief from rising home prices and mortgage rates, according to a recent Realtor.com survey. The share of buyers that said that a recession would make them at least somewhat more likely to purchase a home was 35.9%. That likelihood was even greater among first-time buyers, with 41.6% indicating they were at least somewhat more likely to buy a home after a recession.
"It is not surprising to see many homebuyers want to take advantage of an economic downturn when making a home purchase, " the survey said. "If the economy runs into a recession, the Fed is likely to reverse course and lower its interest rates to boost economic activities. This should put some downward pressure on mortgage rates and relieve some affordability concerns. As a result, buyers with constrained down payments might benefit from utilizing this time to buy."
Mortgage rates topped 7% in September but have hovered between 6% to 7% for most of 2023, according to Freddie Mac. At the same time, home prices across the nation have increased for five straight months and posted a month-over-month increase of 0.7% in June, as the latest S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index data showed.
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Recession aside, buyers said finding a home to buy is another challenge, according to the Realtor.com report. The lack of housing supply is why home prices have kept rising even as demand dries up.
Over 60% of homebuyers said they were unsuccessful in finding homes that met their needs or could not find suitable homes within their budget range, the survey said. The lack of available inventory is one reason many homebuyers can't find the right property.
"While the challenge of finding an appropriate home has consistently ranked as the top reason that prevents people from buying in our data history back to 2019, the share stood much lower at 52.9% in July 2019," Realtor.com said. "Subsequently, over the following Julys, it hovered in the range of 55% to 56%. However, the figure surged past the 60% mark in July 2023."
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