John Burns: Consumer confidence slips as economic uncertainty mounts

Amid inflation worries, political turmoil and ripple effects from new federal spending cuts, Americans are growing increasingly pessimistic about the economy, housing market and their personal finances, according to a new consumer sentiment survey.

Only 34% of U.S. households are optimistic about the economic outlook for the next year, down from 39% in December, according to the survey results from John Burns Research & Consulting.

The share of respondents who described themselves as “very pessimistic” surged by more than 10 percentage points on a quarterly basis.

“All of our consumer and industry channel checks are telling us that consumers are in wait-and-see mode this spring,” said Rick Palacios Jr., director of research and a managing principal at John Burns. “Buyers are naturally hesitant to commit to large purchases when the macroeconomic backdrop is changing rapidly.”

The findings are based on the firm’s New Home Trend Institute’s Household Sentiment Survey, conducted March 7–16 among 1,271 U.S. households.

Inflation, political climate fuel anxiety

Consumers largely blamed the gloomy outlook on persistent inflation and political instability.

More than half (51%) said they are operating on a tighter budget than they were a year ago. Among those, 70% are cutting discretionary spending, 59% are switching to cheaper brands, and 50% are delaying large purchases such as homes, cars or major renovations.

Concerns over tariffs and immigration policy also factored heavily into open-ended responses, the report noted. And a relatively new source of anxiety — federal spending cuts enacted by the U.S. DOGE Service — is already taking a measurable toll.

Despite being introduced only three months ago, DOGE-related actions have affected nearly one in 10 households. The survey found:

• 3% reported job losses due to DOGE-driven restructuring efforts
• 3% accepted or planned to accept a voluntary buyout
• 3% had their hours reduced

While these figures may seem modest, federal employment accounts for a sizable portion of the U.S. workforce.

According to Brookings Institution estimates, 11.3 million workers are employed either directly by the federal government or through contractors and grantees — about 8% of the full-time government workforce.

Job security is also slipping. Only 62% of respondents in March said they felt secure in their current position, down from 65% in December and 67% in September.

Housing sentiment worsens

Housing market sentiment has taken a hit alongside economic confidence. Only 20% of respondents said it’s a good time to buy a home, down from 26% in the fourth quarter of 2024.

Notably, even higher-income households are skeptical of the current market. Among those earning $150,000 or more annually, 41% said now is a bad time to buy. That figure is close to the 50% of lower-income households who feel the same.

Most prospective homebuyers are staying on the sidelines, with only 13% actively shopping for a home. But this number could jump to 20% if economic conditions improve. Seven percent of respondents said they had previously planned to buy a home but have since paused their plans due to market instability.

More than half of consumers (55%) expect home prices in their area to remain flat or decline over the next year. John Burns analysts said these expectations can discourage buyer activity as home shoppers become wary of investing in a depreciating asset.

The ‘magic rate’ remains at 5.5%

As in prior surveys, mortgage rates remain a critical factor.

Nearly four of five consumers (78%) still believe mortgage rates will return to the historically low levels seen in recent years. Most are waiting for rates to fall to 5.5% before jumping back into the market.

That threshold continues to serve as a psychological tipping point for many would-be buyers.

“Consumers are clearly hoping for more favorable conditions,” Palacios said. “But until those materialize, many will remain in limbo.”