Current U.S. Consumer Spending and Its Impact on the Real Estate Market

American consumer spending patterns have always been a powerful driver of the U.S. economy — and today, they are sending mixed signals that are closely tied to the real estate market’s performance.
In 2025, Americans are still spending, but their behaviors have shifted dramatically in response to inflation, interest rates, and housing affordability challenges.
Consumer Spending Is Resilient — But TargetedDespite higher prices and borrowing costs, many Americans continue to spend heavily on experiences, travel, dining, and essentials. Credit card debt is rising, and savings levels are decreasing compared to 2020–2021. However, spending on big-ticket items like homes, renovations, and appliances has cooled off.

Impact on Real EstateHere’s how current spending habits are affecting different segments of the real estate market:

1. Housing Demand Is Fragmented

• First-time homebuyers are pulling back due to high mortgage rates and rising home prices.
  
• Affluent buyers — especially those paying cash — remain active, keeping demand alive in select markets.
  
• Builders are shifting toward smaller, more affordable homes as middle-income buyers retreat.
  

2. Mortgage Payments Are Absorbing More Income

• Monthly mortgage costs have surged due to interest rates staying above 6–7%.
  
• Many potential buyers are choosing to stay put in homes with low 3% mortgages, limiting inventory.
  
• As a result, consumer spending is shifting toward rent, keeping rental markets competitive and prices elevated in many areas.
  

3. Renovation Spending Is Slowing

• After booming during the pandemic, remodeling activity has declined.
  
• Higher interest rates and lower home equity borrowing are contributing factors.
  
• Homeowners are spending more cautiously, focusing on maintenance rather than major upgrades.
  

4. Retail and Commercial Real Estate Reacts to Spending Patterns

• Consumers are favoring experiences and services over material goods.
  
• This is pushing demand toward mixed-use developments, restaurants, and healthcare spaces, while traditional big-box retail struggles.
  
• Investors are cautious, but well-located commercial properties tied to essential services remain in demand.
  

5. Debt and Inflation Pressures Are Building

• Rising credit card balances and auto loan delinquencies indicate households are stretched.
  
• As more income is dedicated to essentials (gas, food, housing), discretionary real estate investments — like vacation homes — have slowed.
  

The Bottom Line

• Americans are still spending, but much of it is needs-based or emotionally driven (travel, comfort, family experiences).
  
• Big financial decisions like home buying are being delayed or downscaled, especially for younger or debt-burdened households.
  
• Affluent cash buyers, investors, and developers are navigating this economy by shifting strategy — targeting resilience over speculation.
  

Real Estate Outlook in Light of Consumer Spending

• Expect continued inventory shortages and high prices in hot markets.
  
• Rental demand remains strong, especially in affordable or growing cities.
  
• Builders and flippers are adjusting to slower demand and higher costs.
  
• Consumers are cautious but not frozen — watching rates, inflation, and job security.