Charlie Wise, senior vice -president and head of Global Research and Consulting at Transunion, attributes the growing divergence to economic uncertainty.
“We really emphasized the consumer levels of financial optimism, pessimism,” Wise said Housing. “It was interesting for us to see that there was that increase in pessimism that we have seen – the highest level since we started asking about that question in 2021.”
The new Transunion study showed that 27% of consumers report that it is pessimistic about their household finances in the coming 12 months and a 6-point increase compared to the investigation into the first quarter of 2024.
Fifty -five percent remains optimistic, a figure that has been kept stable despite economic turbulence.
Uncertainty and rates stimulate fear
Wise said that the persistence of the varied sentiment reflects a polarization that is not necessarily contradictory.
“We have the optimists, we have the pessimists, and then we have the people who are essentially neutral,” he said. “What we have seen is because the level of optimism has been relatively stable, it is people who have been a bit in that uncertain in the middle of the sidelines and said:” Oh, ok, now I feel less positive about the future. “
Economic signals behind the shift in sentiment vary, but rates seem to be a central concern.
“The sounding theme is really the uncertainty about rates and what that means for household finances,” Wise explained. “Most households probably don’t have a strong sense of rates rates, but they know that they don’t like inflation.”
Wise warned that geopolitical instability can further dampen consumer sentiment.
“Everything that gives consumers reasons to fear that a rise in prices is the core wherever the consumer sentiment lies,” he said. “It all just feeds on:” What does that mean for prices, and what does that mean for inflation? ”
“We have seen, looking back from more than 45 years, that the lowest levels of consumer sentiment, the highest peaks of consumer care, have summarized with the periods of the highest inflation levels. So, after taxes or unemployment, it is really inflation that is omnipresent about almost every sector of the US population.”
Interest rate lock will continue to exist
The situation is especially complex for the housing market. Wise noted that the huge number of Americans that the current Hold mortgages have been created since 2022 with rates above 6.5%.
He said that many of these homeowners are anxious to the Federal ReserveIn the hope of a decrease in interest rates. The Fed had a benchmark rates stable in the reach of 4.25% to 4.5% after the two -day meeting on Wednesday
“Millions of consumers are at very low interest rates that they are not enthusiastic to disturb outside of having to move if they get a new job or:” I just outgrown my house and we really have to move. “” Wise said.
“There is absolutely that activity going on. We continue to see that about a million new purchase of mortgages were created every quarter and those figures are actually tapping. So we see activities, but there are many people who are sitting.”
Generational Divide
The survey also found a generation distribution in optimism. Younger Americans – in particular Millennials and Gen Z – reported higher levels of financial trust, while baby boomers expressed growing concern. Wise attributed this to differences in financial flexibility.
“(Boomers) do not necessarily have income flexibility and they may be more concerned about rising prices,” Wise said. “They will probably have more fixed income. They cannot count on wage profits and that can be a problem.”
Gen Z (67%) and Millennial (64%) Optimism over finance in the coming 12 months surpassed that of the total population (55%). Conversely, Gen X (52%) and Boomer (43%) optimism came in lower than the national average.
About every important financial statistics – including future income expectations, planned household budgets and wages that keep up with inflation – sentiment between younger generations of older generations with 10 percentage points or more.
A recession in the feeling, if not in data
Adding the confusion is what WISE describes as a “feel-based recession expectation.” Although traditional statistics show that the US has not entered formal recession since 2020, many consumers have the feeling that they are already in one.
“We look back on 2022, 2023, and a considerable number of consumers then said we are already in a recession. Well, we were not,” Wise said. “But people feel that we are because they are not thinking of the technical definition of recession. They think about how the stagnating, interest rates of the labor market are high and the prices through the roof are.
“They think:” I have more trouble making ends meet. Yes, that qualifies as a recession. “
Wise believes that this requires better tools to measure what a recession means for everyday Americans.
“Subprime consumers are always in a personal recession,” he said. “There may be no recession outside of it, but there is a recession in those four walls,” he said. “Conversely, you have people where the economy might be in the crazy people, but they are doing fine and think:” Which recession? “
