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The worst of the housing inventory shortage is finally easing up, mortgage rates are stabilizing, and job growth is continuing, according to Lawrence Yun, the Chief Economist at the National Association of Realtors (NAR).
Yun shared his insights on the current state of the U.S. residential real estate market and his outlook for 2025-2026 during the Residential Economic Issues and Trends Forum at the 2024 NAR NXT event in Boston, Massachusetts.
Speaking at the forum, Yun highlighted the long-term benefits of homeownership. “Over the years, you see your past clients doing well because they’re homeowners,” he said. “There’s an intangible value that Realtors® provide.”
Reflecting on the past year, Yun noted, “2024 has been a very difficult year on many fronts. We did not get the home sales recovery this year after an awful 2023.”
However, he pointed out a silver lining: household equity in real estate is at a record high, translating to a significant increase in wealth for homeowners, amounting to $35 trillion. Yun emphasized the stark difference in median net worth between homeowners ($415,000) and renters ($10,000) in 2024. “Homeowners’ wealth steadily rises while renters’ wealth does not,” he explained. “If you don’t enter the housing market, you are in the renter class where wealth is not being accumulated. The sooner you get into the housing market, the sooner you start building wealth.”
Yun also addressed the challenges younger Americans and first-time homebuyers face in entering the market. He noted that job gains since the start of the COVID-19 pandemic have led to record-high payroll employment as of September 2024. “When more people work, they are in a better position to buy a home,” he said.
He explained that home sales depend mainly on jobs and mortgage rates. On the topic of job growth, Yun mentioned, “The stock market is very optimistic.”
Discussing mortgage rates during a potential second Donald Trump presidency, Yun remarked, “Mortgage rates in his first term (at 4%) were the good old days. Are we going to go back to 4%? Unfortunately, my forecast suggests we will not. It’s more likely that we’ll see rates around 6%, which will be the new normal, bouncing between 5.5% and 6.5%.”
Yun predicted six to eight more interest rate cuts and advised Federal Reserve Chair Jerome Powell to implement these cuts in January rather than December. He expects four rounds of rate cuts in 2025 and touched on the budget deficit. “Today, we have a massive budget deficit at a time when we are not in an economic recession,” he explained. “President-elect Trump will likely extend or expand tax cuts.”
He added, “There will be less mortgage money available because the government is borrowing so much. However, if the Trump administration can lay out a credible plan to reduce the budget deficit, mortgage rates could move downward.” According to Yun, another way to address the budget deficit is to increase the housing supply. “We have to have more supply,” he said. “We’re trying everything we can to boost supply.”
Yun noted that 2023 was challenging for existing home sales, and 2024 looks similar. However, he mentioned an increase in pending home sales in September and forecasted a roughly 10% boost in existing home sales in 2025 and 2026. He also projected new home sales to be 11% higher in 2025 and 8% higher in 2026, with median home prices expected to rise by 2% in both years.