Consumer expectations of change in median home price over the next 12 months fell to 3.02% in December, according to the monthly Survey of Consumer Expectations released this morning by the Federal Reserve Bank of New York.

This is a 17-basis point decrease compared to November’s 3.19%, and also lower than the 3.73% recorded last December, indicating that consumers surveyed find that the current state of housing is more stable than it was one year ago. This change is supplemented the Federal Reserve's interest rate hike in December, indicating that they believe the economy is strong enough to handle the first rise in nearly 10 years. 

The gap between median household income growth and home price changes narrowed significantly between August and September, indicating that consumers might have been more optimistic about housing affordability. Since October, the gap has widened, but the decline in median expected home price "was driven in particular by lower income and older respondents," the Federal Reserve reports, while the decline in expected household income is attributed to respondents that are younger, have higher education, or higher income. 

Broken down regionally, consumers in the West believed home prices would change the most, by 3.26%, in the next year, while consumers in the Midwest and Northeast both only expect a 3% fluctuation. In the South region, the home price was expected to go up by 3.03%. 

By age, older Americans seem to consider home prices more volatile, as respondents age 60 and older consistently expect greater fluctuation (3.39%) in home prices than respondents aged 40-60 (3%), and respondents under 40 years-old (2.7%). 

The New York Fed interviews approximately 1,200 people from a rolling panel each month for the Survey of Consumer Expectations, and each respondent participates in the survey for up to a year. Read more about the December survey results here >>