The biggest purchase in life now seems unaffordable — and that’s putting consumers in a sour mood

Mark Hulbert

Sun, February 22, 2026 at 2:49 AM GMT+9 3 min read

The Consumer Price Index is trending lower, but consumers are increasingly gloomy about their finances. - MarketWatch/iStockphoto

Looking at the U.S. economy, American consumers have a lot to be optimistic about. The inflation-measuring Consumer Price Index is trending lower and is only slightly above the Fed’s 2% target. The country’s unemployment rate is less than one percentage point above its recent 50-year low, and well below its historical average.

Yet consumers are downright gloomy about their finances nowadays, for one key reason: Most can’t afford to buy a home.

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A study published in January in the journal Economics Letters links consumer malaise in large part to the high cost of housing — which the Consumer Price Index undercounts. Entitled “The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly,” the study was conducted by a group of researchers from Harvard University and the International Monetary Fund.

They wrote: “Mortgage costs are a decisive factor in consumers’ assessment of their ability to make what for many Americans amounts to the most meaningful purchase of their lives. The exclusion of these costs means that the current methodology [for calculating the CPI] excludes a central part of consumers’ financial well-being.”

The chart above illustrates the link between consumer sentiment and housing affordability. It plots over the past five years the University of Michigan’s Index of Consumer Sentiment and the Atlanta Fed’s Housing Affordability Index. Though this housing index is not the same as the one the researchers used in their study (since current data for it is not available), it makes the same point.

Notice the broad correlation between the two indices. Both dropped precipitously as the economy emerged from the COVID-19 pandemic lockdowns and housing prices shot up. On several occasions between 2022 and 2024 the UMICH rose strongly as the HAI ticked upwards, with consumers in each case subsequently discovering that their excitement was premature. Both indices today are near five-year lows.

Though the researchers found that housing affordability plays an outsized role in consumers’ mood, it wasn’t the only factor. They also found that borrowing costs generally have an impact, and those costs also are undercounted in the CPI.

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Here, too, it’s easy to understand why consumers are gloomy: Even though non-housing borrowing costs have come down slightly in recent months, they remain near the highest they’ve been in five years. The 10-year U.S. Treasury BX:TMUBMUSD10Y, on which many consumer borrowing rates are based, is down only slightly from its five-year high — as you can see from the chart below.

10-year U.S. Treasury yield — 2021 through 2025. -

The bottom line? Before consumers can become meaningfully more optimistic, housing will need to become more affordable. That won’t be easy, and even if it happens, it won’t come quickly.

_Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at _

**More: **Why your portfolio may face one last rate-hike surprise before May

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