Nearly one-third or 31% of respondents were anticipating financing costs in the market to fall last month compared to a little under one-fourth or 22% in November. Another 31% of those surveyed in December expected increases. Most of the rest anticipated rates would plateau.

The survey suggests that Federal Reserve policy statements about potential rate cuts next year have been even more effective than the pandemic when it comes to convincing consumers there'll be a drop in financing costs. That could have both sell- and buy-side implications.

"A more positive mortgage-rate outlook may incent some to list their homes for sale," Mark Palim, vice president, deputy chief economist, Fannie Mae, said in a press release.

However, just 17% of borrowers characterized December as a "good time to buy a home," up slightly from November's record low of 14%. Overall, Fannie's Home Purchase Sentiment Index was up just 6.2 points from a year ago and 2.9 from the previous month at 67.2. 

"Even if rates fall further, we continue to believe that affordability will be tempered in part by elevated home prices," Palim said.

However, there is a point at which rates drop far enough that the buy- and sell-side reach equilibrium, DoubleLine Portfolio Manager Ken Shinoda said in a separate study published last month.

"There is a magic number for fixed mortgage rates that I think would unfreeze the housing market — in other words, a price bringing together buyers and sellers, a market-clearing price," he said. "By my lights, that number has a 5% handle."

In the past week, the average fixed rate by one measure was 6.62% and up a little in response to economic indicators that policymakers watch closely.

Whether it ultimately is a good time to buy for consumers is based on various individual considerations and math related to the cost of the overall purchase and their incomes. But generally some lenders suggest that waiting for prices rather than rates to soften could backfire.

The risk is that like last year, lower home prices could generally fail to materialize, Daniel Jacobs, founder and director of TruLoan Mortgage said, noting that while housing valuations may continue climbing at a slower rate, he doesn't think they'll depreciate.

"There's a lot of momentum on the side of rates going down so we think it's really a good time to jump in," he said. "I think we're going to see a slow down in appreciation and then it's going to snap back." 

The market is seasonally slow now and dominated by people forced by life events like a job-related relocation or divorce to move. It might become more competitive by the spring when rates could fall further and homebuying usually ramps up.

Jacobs noted that dynamics beyond Fed policy regarding short-term financing costs influence home-loan rates for borrowers, including how the value of competing investments affects demand for mortgages in the secondary market.

While there was a lot of concern about historically wide spreads between mortgages and benchmark Treasuries, which intensified upward rate pressure in the past year, that's been reversing to some degree as financing costs have fallen. This trend may continue.

"As rates begin to come down and the economy starts to normalize and soften somewhat, that spread should begin to narrow at the same time rates are coming down, which should have a doubling effect," Jacobs said.