Inflation still hitting homeowners hard

Over the past few years, Americans have faced a relentless surge in living costs. Although inflation has eased somewhat since its peak in 2022, recent data from the Federal Reserve reveals that consumer prices have jumped by 3.4% in the past year and a staggering 22.7% over the last five years. 

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This financial squeeze is hitting homeowners particularly hard. A new Point survey reports that 67% of homeowners are struggling to keep up with their monthly expenses. The situation is so dire that nearly half (48%) are searching for additional ways to make more income, underscoring the pervasive impact of rising costs on daily life.

Are you finding it difficult to keep up with your monthly expenses?

As former Treasury Secretary Larry Summers states in his most recent paper, The Cost of Money is Part of the Cost of Living, we could be underestimating how miserable Americans are in their current financial situation. As interest rates hit historic highs, Americans have become increasingly negative about the economy. The cost of borrowing money has hit homeowners particularly hard, as refinancing or attaining a HELOC has become particularly difficult and often cost-prohibitive. Summers argues that we’ll likely see improved sentiment when rates dip again.

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‍"The simple idea is part of the cost of living is the cost of money.  And the cost of money is still way elevated from where it was." - Former Treasury Secretary Larry Summers

Rising expenses create a burden on homeowners

Point’s survey found that about half (53%) of homeowners say their expenses have increased at least somewhat in the past 12 months, with about 40% of respondents saying their monthly expenses increased by $300 to $1,000. 

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For a homeowner earning the median annual household income of $74,580, assuming a $500 per month increase nets out to 8% of their yearly earnings.

Have your monthly expenses changed in the past 12 months?

Respondents say the rising cost of everyday items, including grocery bills and utilities, is the heaviest burden. Homeowners report feeling the sting of rising prices, and research from the Urban Land Institute found that in 2023, people dipped into their savings or turned to credit cards, “buy now, pay later” installment programs, or payday loans to pay for groceries.

Areas respondents cited as seeing the largest expense increases 

An overwhelming 78% of homeowners say the current economic climate has negatively impacted their overall finances. Nearly half (43%) say they’ve stopped unnecessary spending on discretionary items like travel or eating out, and 39% say they’ve delayed home repairs or maintenance. The cost of restaurant food rose 4.1% in the past year¹, while home maintenance costs have increased by about 8% in that time frame².

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As a result, homeowners were looking to adjust their financial situations in the coming year, including working additional hours or taking on a second job. 

What have you done to address the shortfall in your income?

Looking ahead

Homeowners aren’t particularly optimistic about their financial futures: 36% report feeling unsure about their finances for the next 12 months.

This lack of confidence may be spurring homeowners to take action in the coming year. A notable 84% say they plan to change their financial situation in the next 12 months. Some of these changes involve supplementing their current income, like taking on an additional job or working more hours.

How people plan to improve their financial situation

However, other actions homeowners plan to take in the next 12 months to change their financial situation in the near term can have longer-term consequences. For example, 8% of homeowners say they plan to take on more debt via a personal loan, and 5% plan to take on credit card debt. Others say they plan to borrow money from their savings, friends, and/or family, or hold off on saving for future expenses like retirement or emergency funds. While these actions may help homeowners make ends meet in the short term, they could come with longer-term consequences if an unexpected expense arises. 

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And while home equity is one of the leading sources of wealth for many homeowners, just one-fifth (20%) of them say they plan to leverage their home in some way to help mitigate rising costs in the coming year. While homeowners collectively have trillions of dollars in home equity, previous Point research finds it can be difficult for most homeowners to access it via traditional methods like cash-out refinancing and HELOCs, which could explain why most homeowners aren’t choosing to tap into it.

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The impact of inflation on homeowners is undeniable, compelling many to explore new ways to mitigate the strain. As the economic landscape continues to evolve, it will be essential for homeowners to take proactive measures to navigate any uncertainties.