South of the border?
Why not? After all, a road trip like that might sound like just the ticket, especially when winter takes its sweet time getting out of dodge.
But if consumer confidence heads south, well, that’s a tumble that can be a kick to the backside of sectors like real estate.
Consumer confidence was a topic of conversation at the end of 2025 and is back in 2026. In January, The Conference Board Consumer Confidence Index dipped 9.7 points to 84.5, according to ConsumerAffairs. That’s its lowest level in more than 10 years.
Across every demographic group, there was a deterioration of confidence. While consumers less than 35 – and, particularly, Gen Z – continued to be more optimistic than older generations, sentiment tumbled for all age and income brackets on a six-month moving average basis.
What does that mean for the housing market?
Joanne Hsu is the director of monthly surveys of consumers that track leading economic indicators, including consumer sentiment, and a research associate professor at the Institute for Social Research at the University of Michigan. She told The Mortgage Note that consumers’ assessments of buying conditions for homes “remain very poor,” primarily on the basis of high prices and borrowing costs.
“Moreover, consumer views of the economy are generally unfavorable, with frustration over the persistence of high prices and worry that labor markets may be weakening,” Hsu said.
However, wealthier consumers are supported by strong stock market valuations and may be willing to spend despite high housing costs, she said. 29% of homebuyers paid with cash in December.
Soon Hyeok Choi is an assistant professor of real estate finance at the Saunders College of Business at the Rochester Institute of Technology in Rochester, NY. He told The Mortgage Note that when consumer confidence drops, “buyers tend to pause big commitments. The first visible effects are usually softer demand, fewer offers, and longer time on market, with sellers increasingly needing price cuts or concessions to close deals.”
Another player in the equation, he continued, is home equity sensitivity.
“A slower market can lead to smaller year-over-year gains — or declines — in home equity, especially in segments that were most stretched on affordability,” Choi said.
That can create a “feedback loop: weaker equity reduces mobility and willingness to stretch on a purchase, which can add downward pressure on home prices, particularly where inventory builds.”
Where does it hit hardest? Confidence shocks are most prevalent in discretionary moves or trade-up buyers, second homes, and higher-price segments, while tight inventory can keep entry-level prices “relatively sticky” in some areas.
On the commercial side, confidence affects leasing and cap rates through “risk appetite,” Choi said. Lower confidence can slow tenant decision-making and make investors more cautious, which can widen the required yields.
“That said, the story varies a lot by property type,” Choi said.
He explained that brick-and-mortar stores show a “soft comeback” in select categories. In many markets, necessity-based retail and well-located experiential formats have looked more resilient than expected, and some operators are cautiously expanding again.
“A confidence dip may slow that momentum, but it doesn’t automatically reverse it — especially where supply is constrained, and locations are strong,” Choi said.
Managing Director and Senior Equity Research Analyst at Mizuho Securities USA Haendel St. Juste says lower retailer sales and margins — from lower consumer confidence — could eventually lead to weaker demand for space, but in the near-term, well-capitalized retailers such as discount value, sporting goods, and medical retail continue to expand their footprints.
St. Juste said it is important to monitor sales productivity at a variety of retailers as the K-Shaped economy widens.
This year, it’s anticipated that commercial real estate investment activity will experience a 16% uptick, hitting $562 billion, according to CBRE.
Roger Yang, a partner at KPMG’s Los Angeles office, has experience serving real estate companies, including public and private homebuilders. He says, “consumer confidence impacts real estate, but it’s not a blanket effect; it’s highly selective.”
Multi-family, residential, and retail feel the pressure most directly because they depend on consumer decision-making.
Yang said developers and investors are increasingly pulling back on new multifamily and retail projects, instead deploying capital into high-demand sectors such as data centers.
For existing properties, the playbook has shifted from “Build new” to “Make better.” Developers are upgrading well-positioned retail assets and adding amenities that make multi-family properties genuinely competitive, shifting the focus from chasing rent growth to protecting occupancy.
“The calculus is simple: a tenant paying market rent beats an empty unit holding out for more. Occupancy is the new rent growth,” Yang said.
Yang said because consumers appear to be adapting to an environment of lower confidence and are developing a tolerance for uncertainty, broader economic indicators like unemployment and interest rate volatility are the factors “that really matter here.”
“Those are what keep potential homebuyers waiting on the sidelines, make renters more price-sensitive, and pull back consumers’ willingness to shop and spend on non-essential retail,” Yang said.
