From rates to real estate: a sentiment analysis of buy, sell, and rent decisions

Purpose The study aims to investigate how US households form expectations about housing market variables, particularly mortgage rates, home prices and rent, and how these expectations influence their buying, selling and renting decisions. It also seeks to understand how broader macroeconomic factors like inflation and interest rates shape consumer sentiment and behavior in the housing market. Design/methodology/approach The study uses a behavioral economics lens and relies on survey-based consumer sentiment data. It examines the relationships between perceived inflation, mortgage rates and housing decisions using comparative analysis across different decision types - buying, selling, and renting. Econometric tools such as regression analysis are used to interpret these relationships. Findings Households generally believe that persistent inflation will lead to higher mortgage rates, which in turn are expected to put downward pressure on home prices. Among the factors shaping home price expectations, mortgage rates exert the strongest influence. Buyers tend to be most responsive to recent home price trends, whereas sellers are more sensitive to changes in interest rates. In the rental market, inflation emerges as the primary driver of expected rent increases. Overall, market sentiment significantly shapes consumer decision-making in the housing market. Research limitations/implications The research adds to the literature on expectation formation in housing markets by distinguishing between how inflation and interest rates affect buyers, sellers, and renters differently. It highlights the need for future research on the temporal dynamics and predictive power of consumer sentiment in forecasting housing asset prices. Practical implications For policymakers, understanding how inflation expectations translate into housing decisions can help smooth monetary policy communication. For central banks, signals that consumers are more reactive to mortgage rates than federal funds rates may influence how rate changes are timed and explained. For Real Estate Professionals, knowing that movers are more likely to buy, even under unfavorable market conditions, can inform targeting strategies. Social implications Understanding the behavioral dynamic of housing market participants is essential for improving financial literacy and for designing policy communication strategies that help households interpret monetary developments more accurately and inform better decisions about when to buy, sell, or hold property. Originality/value The research offers a behavioral interpretation of housing market decisions by integrating sentiment, expectations and macroeconomic indicators. It provides a forward-looking framework to assess how consumer sentiment may serve as a leading indicator for home price trends and asset valuation.