The National Association of Realtors (NAR) Chief Economist Lawrence Yun said that job increases are continuing, mortgage rates are normalizing, and the worst of the housing inventory deficit is over.
During the Residential Economic Issues and Trends Forum at 2024 NAR NXT, The REALTOR Experience, in Boston, Yun discussed his prediction for 2025–2026 and examined the current status of the U.S. residential real estate market.
“Over the years, you see your past clients doing well, because they’re homeowners,” Yun said. “There’s an intangible value that [Realtors] provide. 2024 has been a very difficult year on many fronts. We did not get the home sales recovery this year after an awful 2023.”
Yun explained, however, that real estate equity for households is at an all-time high. This indicates that the wealth of Realtors’ former clientele has increased significantly, by $35 trillion. Yun drew attention to the stark disparity between the projected median net worth of renters ($10,000) and homeowners ($415,000) in 2024.
“Homeowners’ wealth steadily rises while renters’ wealth does not,” Yun said. “If you don’t enter the housing market, you are in the renter class where wealth is not being accumulated. If you want to participate in the housing market, the sooner you get in, the sooner you accumulate wealth.”
Yun also pointed out that younger Americans have a far lower homeownership rate and that first-time homebuyers are finding it difficult to get into the market. He said that as of September 2024, payroll employment in the US has reached a record high due to job gains since the start of the COVID-19 epidemic in March of 2020.
“When more people work, they have the capacity or they’re in a better position to buy a home,” Yun said. “Home sales depend mainly on jobs and mortgage rates.”
Regarding whether we are going to see an acceleration of job growth, Yun stated, “The stock market is very optimistic.”
Highlighting the Value of Homeownership
“Mortgage rates in his first term (at 4%) were the good old days,” Yun said in reference to mortgage rates during a second Donald Trump administration. “Will we return to the 4% level? Unfortunately, according to my prediction, we won’t. We’re more likely to return to 6%. The new normal will be oscillating between 5.5% and 6.5%.”
According to Yun, six to eight additional interest rate reductions are likely. “My advice to Jerome Powell: do it in January, rather than December,” he said, advising the Federal Reserve chair on when to implement these cuts.
Yun anticipates that rate decreases will occur four times in 2025. He talked on the budget deficit as well.
“Today, we have a massive budget deficit at a time when we are not in an economic recession,” Yun said. “Clearly president-elect Trump will not stop tax cuts—he will extend or expand them.”
He added, “There will be less mortgage money available because the government is borrowing so much money. However, if the Trump administration can lay out a credible plan to reduce the budget deficit, then mortgage rates can move downward.”
He further explained that lowering housing costs is another strategy to deal with the budget imbalance.
“We have to have more supply,” said Yun. “Per our advocacy efforts, we’re trying everything we can to boost supply.”
Yun pointed out that existing-home sales had a rough 2023, and it appears that 2024 will be no different. He did, however, point out that there was a rise in pending home sales in September and offered his prediction for existing home sales.
“Maybe the worst is coming to an end,” added Yun. “Directionally, I think there’s going to be roughly a 10% boost of existing-home sales in 2025 and 2026.”
Overall, according to Yun, new home sales will increase by 11% in 2025 and 8% in 2026. In 2025 and 2026, he predicts an estimated 2% increase in the median home price.
To read the full report, including more data and methodology, click here.
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