Impact of Consumer Confidence on Real Estate in 2025

In 2025, consumer confidence remains volatile, experiencing a notable decline recently amid news surrounding potential tariffs and market fluctuations. This uncertainty raises questions about how these sentiments may influence real estate purchasing behaviors and whether consumer confidence can serve as an accurate predictor of housing market performance.

Understanding Consumer Confidence Trends

As reported by the Conference Board at the end of March, consumer confidence dipped significantly, falling by 7.2 points to a level of 92.9. This drop has been accompanied by a notable decline in the Expectations Index, which measures the short-term outlook on income and business conditions, hitting a 12-year low of 65.2. A score below 80 typically indicates that a recession may be on the horizon.

The decline in confidence particularly affects those aged 55 and older, with a slightly lesser impact on individuals between 35 and 55. In contrast, younger individuals under 35 and households with incomes exceeding $125,000 exhibit more robust confidence levels.

Consumer Confidence as an Indicator of Housing Activity

Experts suggest that while there seems to be a perceived link between consumer confidence and real estate transactions, substantial academic research to back it is limited. According to Ken Johnson, Ph.D., a real estate expert at The University of Mississippi, “there is little scientific support for what seems to be a given.”

Typically, heightened consumer confidence correlates with a greater willingness to invest in homes. Selma Hepp, chief economist and SVP at Cotality, indicates that optimism about the economy and personal financial situations encourages home buying, a notable contrast to faltering confidence which may lead households to delay significant financial decisions.

Current Economic Factors and Their Influence

The present economic landscape is characterized by consumers delaying their purchasing decisions due to uncertainty. Greg Willett, chief economist for LeaseLock, explained, “uncertainty tends to make people put off major financial or lifestyle decisions.” Despite this, industry experts, like Fatima Malik from Engel & Völkers Beverly Hills, note that declining confidence typically delays rather than halts purchasing decisions, suggesting that life events—such as job changes or family needs—continue to drive real estate activity.

Regional Divergence in Consumer Sentiment

Consumer confidence and purchasing behaviors vary significantly across different geographic regions. For instance, markets like New York City and Los Angeles do not conform to national trends. Scott Harris from Magnetic real estate firm points out that high-end markets—particularly those above $3 million—remain less affected by economic fluctuations. Similarly, Los Angeles presents a scenario where buyers are returning to the market with adapted strategies despite challenging conditions.

Metrics Beyond Consumer Confidence

To gauge real estate market activity more accurately, experts emphasize the importance of observing additional metrics. Hepp recommends focusing on traditional indicators such as:

• Days on market
• Listing prices versus sale prices
• Inventory levels
• Number of offers per listing
• Mortgage rates

Johnson adds that ongoing inventory challenges exert a more substantial influence over the housing market than consumer sentiment alone.

Strategies for Real Estate Professionals

In light of fluctuating consumer sentiment, real estate agents are advised to adopt proactive strategies to mitigate potential impacts. Harris recommends helping clients concentrate on crucial priorities, while Hepp advocates for educating them about specific market trends. Johnson suggests diversifying services beyond residential sales, such as including property management, to stabilize revenue streams during downturns.

Monitoring Economic Indicators

Willett highlights the importance of keeping track of job market fluctuations in high-wage sectors, which can substantially influence purchasing power in the housing market. As the pace of economic expansion slows, understanding these dynamics becomes increasingly vital for industry stakeholders.