Economists' Outlook

Housing stats and analysis from NAR's research experts.

Obtaining Credit and Income Growth Expectations

More Consumers Reported Difficulty in Obtaining Credit; Expect Modest Income Growth Compared to Pre-Pandemic Period

Income and credit conditions are two main factors that affect the ability of consumers in obtaining a loan, either for a home or other personal property. Many families are having to deal with changes in incomes that affect their ability to obtain credit. Some have lost jobs and may have had to borrow money to pay bills. The pandemic has led to rising unemployment and loss of income has impacted the ability to obtain credit. This blog looks at the latest trends on the perception to obtain credit and income growth from the Federal Reserve Board of New York’s Survey of Consumer Expectations.

Credit Availability

Looking ahead consumers feel as though obtaining credit would seem equally easy and hard. However, from January to August the availability of credit still appears to be harder for the majority. Prior to the pandemic, 51% of consumers reported that credit was equally easy and hard to obtain, but this share went down to 31% in April. This has gone back up to 40%, but it is still below the pre-pandemic level of 51%. Those who find it somewhat harder rose 25% after January to 36% in August. This trend is in alignment with those who are not finding it easier to obtain credit in the future.

Line graph: Credit Availability Year, Ahead, January 2020 to August 2020

Household Income Growth

The median expected income growth began to fall in January and bottomed in April. The expected median income growth began to increase from April across income levels, but consumers with incomes above $100,000 began to fall again in July. Those with incomes $50,000 and below had the slowest median expected income growth from January to August.

Line graph: Household Income Growth by Income Level, January 2020 to August 2020

Looking at income growth by age we can see that those over the age of 60 experienced the least impact on their expected income growth since January. Those who are over the age of 60 are more likely to have fixed incomes and maybe retired. Those incomes will not be affected by the pandemic the same as the younger demographic. Those aged 40 and under experienced the biggest dip in median expected income growth. This age group includes workers who have lost their jobs and or may have had to endure a reduction in salary.

Line graph: Household Income Growth by Age, January 2020 to August 2020

Regionally, respondents from the West region had the largest decline in projected income growth from January to August followed by respondents from the South. Respondents from the Midwest reported the smallest decline in expected income growth. In August, respondents had the highest median expected income growth at 2.38%, while respondents from the West region had the lowest growth in incomes at 1.92%. Lower expected income growth reduces the expectation of these respondents to afford a home.

Line graph: Income Growth One Year Ahead by Region, January 2020 to August 2020

The West region is dealing with fires, higher levels of unemployment, and lower incomes. There is hope that there are efforts in place to help turn things around for the many families in that region. More jobs are coming back to help support the economy and the unemployment rate is falling, however, it is still very high. More jobs will help bring incomes back from some of the lows we have recently seen. Those who have steady incomes and good credit will be able to get through the lending process when buying a home during times of tighter lending standards. With record-low interest rates buying a home can be a good investment for the long term. There is also a share of homeowners who are taking advantage of being able to refinance their homes and lower their monthly mortgage payments. Borrowing money has never been this cheap. Consumers who find themselves still working on refining their financial situation can continue to work on improving credit scores, increase savings, and building their financial literacy.