December 8, 2025 Stock Market Decline and Fed Rate Cut Impact on Homebuyers

On December 8, 2025, all three major U.S. stock indices closed lower: the S&P 500 at 6,846.50 (-0.42%), NASDAQ Composite at 23,545.90 (-0.39%), and Dow Jones Industrial Average at 47,739.33 (-0.48%) [0]. This decline represented a pullback from recent record heights, with investors likely taking profits ahead of the Federal Reserve’s final 2025 monetary policy meeting on December 10 [0]. The selloff had broader regional implications, as Asian stock markets followed Wall Street lower on December 9 [3].

Market data [0] shows an 87% probability priced in for a 25 bps Fed rate cut at the December meeting. While this reduction would lower short-term borrowing costs, experts caution that mortgage rates may not experience significant immediate declines, as the Fed does not directly set long-term mortgage rates [4]. Current mortgage rate data (as of December 4, 2025) indicates the 30-year rate fell to 6.19%—near its 2025 low, down from 6.23% the previous week, and well below the 52-week average of 6.63% [6]. Year-over-year, rates are down from 6.69% in December 2024 [6].

2026 housing market forecasts project mortgage rates to remain stable around 6.2-6.3% [4][7]. Realtor.com estimates home prices will rise 2.2% annually, while inventory is expected to increase by 9% [4]. Despite price growth, affordability is projected to improve due to stable rates, rising incomes, and greater housing supply [4].

1. Temporary market pullback, not trend reversal
   : The December 8 decline is viewed as profit-taking ahead of the Fed meeting rather than a significant trend reversal, with Asian markets following suit but sentiment remaining broadly positive [3][5].
2. Fed rate cuts and mortgage rates disconnect
   : The Fed’s short-term rate decisions do not directly translate to long-term mortgage rates, so a December cut may not immediately lower home loan costs [6].
3. 2026 housing balance
   : Stable mortgage rates, increasing inventory, and rising incomes are expected to improve housing affordability despite modest home price growth [4].

• Mortgage rate disconnect
  : A Fed rate cut does not guarantee lower mortgage rates, as long-term rates are influenced by broader economic factors [6].
• Inflation volatility
  : Unexpected inflationary pressures could drive mortgage rates higher, even if the Fed cuts rates [4].
• Fed policy surprise
  : Market volatility could occur if the Fed’s decision (size of cut, post-meeting tone) differs from market expectations [0].

• Improved 2026 affordability
  : Stable rates and rising incomes may make homeownership more accessible for buyers [4].
• Post-meeting stability
  : If the Fed meets rate cut expectations, the market could stabilize following the temporary pullback [0].

• Major U.S. indices declined 0.39-0.48% on December 8, 2025, amid pre-Fed meeting profit-taking [0].
• Market prices an 87% chance of a 25 bps Fed rate cut in December 2025 [0].
• Current 30-year mortgage rate (6.19%) is near 2025 lows, down 0.5% year-over-year [6].
• 2026 forecasts: mortgage rates ~6.3%, home prices +2.2%, inventory +9% [4][7].
• Housing affordability to improve in 2026 due to stable rates and rising incomes [4].