Median expected growth in household income declined 1.3 percentage point to 3.3% in the January survey, the largest monthly drop in data going back almost ten years, the New York Fed in a report Monday. Views on inflation one year ahead were unchanged at 5%. 

Expectations for income growth remain higher than their pre-pandemic levels. Still, increasing budget strain is showing in the results, with the average perceived probability of missing a minimum debt payment over the next three months ticking up in January.

Households were mixed about where inflation might head in the longer run. Inflation expectations softened to 2.7% three years ahead, but increased at the five-year-ahead horizon to 2.5%.

Consumers also anticipate steeper gains in gasoline and food prices than in December.

As the real estate market cooled amid higher interest rates, so have expectations for home prices. 

A quarter of the respondents anticipate housing prices to drop by 3% over the next year — matching a record decline set in April 2020, the month after Covid-19 was declared a pandemic. And for the first time since the monthly survey was started in June 2013, respondents with income of $100,000 or more expect home prices to fall in the coming year.