C
onsumer sentiment remained high in December, driven by expectations of declining mortgage rates in 2025. Despite last year's optimism about the housing market, hopes for low mortgage rates and a rebound in sales never materialized, leaving many buyers priced out. However, according to Fannie Mae's Home Purchase Sentiment Index, consumer sentiment continued to trend upward, reaching 73.1 in December, "substantially above year-ago levels." Still, it dipped from its November high, suggesting a potential reversal if mortgage rates remain elevated.

    Consumers are betting on lower rates in 2025, with 42% expecting declines in the next 12 months, down from 45% in November but up significantly from 31% a year ago. The upcoming labor and inflation reports will likely dictate where rates go in the coming weeks. Fannie Mae predicts a modest decline in mortgage rates, slowing home price growth, and higher wage growth in 2025, leading to improved affordability.

    The market is expected to remain highly competitive, requiring buyers to be savvy. Only 22% of those surveyed said now is a good time to buy a home, while 63% say it's a good time to sell. A bigger share (38%) expect prices to rise in the coming year compared to those who think prices will go down (27%). Employment and income metrics were relatively flat between November and December, with slight decreases in job security concerns and increases in household income.