Where are home prices headed this December? Here's what to consider now.

As the job market softens and no guarantee that the Federal Reserve will continue interest rate cuts, average home prices still remain above $500,000. This can be discouraging, especially for first-time homebuyers who were hoping for more affordability factors to show up in their favor. High mortgage interest rates in recent years and elevated prices have made for an expensive combination so any relief with the latter, in particular, would be helpful for buyers now.

So where are home prices headed this December, specifically? We spoke with housing market and lending experts to get a better idea on how prices could change in the final weeks of the year. Below, we'll detail what they expect to happen now (and what buyers may want to do in response).

Start by seeing how low your current mortgage rate offers are here.

Where are home prices headed this December? 

Home prices are expected to increase, especially as more rate cuts are on the horizon. While the chances of a Federal Reserve rate cut are growing, and thus mortgage rates are likely to decrease, neither is guaranteed. While the end of the year is usually a time when the market cools for the holidays and home prices decrease, it may not be the case this December.

Nadia Evangelou, National Association of Realtors senior economist and director of real estate research, points to mortgage rates falling as the main driver behind home prices increasing.

"Nationally, we expect prices to keep rising. Lower mortgage rates will bring more buyers back in, and supply is still far too tight for most of the buyers," she says. "For prices to fall, we'd need a real surge in listings and we're not seeing that right now."

It's a common thread among real estate and housing experts, as John Walkup, co-founder of real estate data analytics company UrbanDigs, notes. "Lower rates mean homes are easier to afford, which filters through to rising transaction volume and higher prices," he says.

Get started with a low-rate mortgage loan before prices rise again.

Some markets cool, others don't

While overall, home prices are expected to tick up this month, pricing is almost entirely dependent on your location and its factors. While some areas have a balance of strong inventory and demand that translates to stable home prices, most large metropolitan cities are still struggling with affordability.

Evangelou points out that Midwest markets tend to have affordable homes with strong inventory, but most Sunbelt and West Coast areas are still pricing out middle-class borrowers. 

David Harris, a Coldwell Banker Warburg real estate agent, agrees. "In general, the Midwest's affordability provides markets that diverge from the national average. While they also face low inventory, the affordability attracts buyers, making it a standout area," Harris says.

But as mortgage rates decline, buyers are coming into the market and increasing competition. Some areas are in a transition period toward higher prices, making now a potentially opportune time to buy.

"There are four main drivers: transaction volume, incomes and income expectations, mortgage rates and market momentum," Walkup says. "We're at the edge of that tipping point in several cities, especially as buyers slowly re-enter markets they sat out of for a few years."

What homebuyers can do this December

If you're shopping for homes, the end of the year can frequently be a time of low competition and affordable prices. But as consumers wait for the Fed's year-end rate decisions that affect mortgages, it's important to understand your local market, not just the national one.

This means knowing if companies are moving into your city, thus creating jobs and bringing in more buyers, or if suburban development is increasing, bringing more homes onto the market in your area and driving down prices.

"National numbers are helpful, but no one buys a home in the 'national market.' Real estate is entirely local," Evangelou says. "What really matters is what's happening in your neighborhood — how many homes are for sale, whether jobs are growing and if more people are moving in or out."

Here are some tips for homebuyers this month: 

• Be financially prepared to submit an offer with a pre-approval letter from your mortgage or proof of funds from your financial institution.
• Research your local market to understand where home prices are now and where they were in the past six months.
• Keep an eye on Federal Reserve rate decisions for potential mortgage interest rate drops.
• Work with a local real estate agent for insight into your market. They should know the ins and outs of home prices in your area and give you key information on potential price movements.

"Contact your local expert real estate agent. They may have knowledge of opportunities, on- and off-market, that suit your needs," Harris advises. "You won't know because you don't know where to look, but they do."

The bottom line

Home prices are mostly expected to increase in December and into 2026, especially as inventory levels in many areas continue to sit below buyer demand. Experts recommend not discounting the end of the year to buy a home, even with winter weather and holiday commitments slowing down timelines, as your local market may be more affordable than the national one.

It could still be the time to buy, as long as mortgage rates continue their downward trend. A 0.25% rate decrease could translate to thousands of dollars of savings over the life of the loan. "Don't overlook the holiday season. There's typically less competition and more motivated sellers," Evangelou says. "While home prices are expected to keep rising, watch mortgage rates closely and run the numbers. Even a small drop can make a home more affordable."