According to NAR Chief Economist Lawrence Yun, the worst of the housing inventory shortage is nearing its end, mortgage rates are stabilizing, and job growth continues. Yun shared his analysis of the U.S. residential real estate market along with his outlook for 2025-2026 during the Residential Economic Issues and Trends Forum at the 2024 NAR NXT, The REALTOR® Experience, in Boston, Massachusetts.
“Over the years, you see your past clients doing well because they’re homeowners,” explained Yun. “There’s an intangible value that [Realtors®] provide.”
Reflecting on 2024, 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 that household equity in real estate has reached a record high, creating significant wealth gains for past clients, totaling $35 trillion. He emphasized the substantial disparity in estimated median net worth between homeowners ($415,000) and renters ($10,000) in 2024.
“Homeowners’ wealth steadily rises while renters’ wealth does not,” said Yun. “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 addressed the challenges faced by younger Americans and first-time buyers in entering the market.
He highlighted that job gains since the onset of the COVID-19 pandemic (March 2020) have driven payroll employment to a record high as of September 2024.
“When more people work, they have the capacity or they’re in a better position to buy a home,” stated Yun, reminding Realtors® that “home sales depend mainly on jobs and mortgage rates.”
On job growth acceleration, Yun remarked, “The stock market is very optimistic.”
Yun also commented on mortgage rates during a potential second Trump presidency, stating, “Mortgage rates in his first term (at 4%) were the good old days. Are we going to go back to 4%? Per my forecast, unfortunately, we will not. It’s more likely that we’ll go back to 6%. That will be the new normal, bouncing around 5.5%-6.5%.”
He anticipated six to eight more interest rate cuts and shared his advice for Federal Reserve Chair Jerome Powell: “My advice to Jerome Powell: do it in January, rather than December.”
He expects four rounds of rate cuts in 2025 and also addressed the budget deficit.
“Today, we have a massive budget deficit at a time when we are not in an economic recession,” explained Yun. “Clearly, president-elect Trump will not stop tax cuts – he will extend or expand them.”
Yun 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 suggested that another way to address the budget deficit would be through reducing housing prices.
“We have to have more supply,” said Yun. “Per our advocacy efforts, we’re trying everything we can to boost supply.”
Noting the struggles for existing-home sales in 2023 and a similar outlook for 2024, Yun highlighted a recent uptick in pending home sales in September and shared his forecast.
“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.”
For new home sales, Yun projects an 11% increase in 2025 and an 8% rise in 2026. He also forecasts a 2% growth in median home prices for both years.
