BOSTON – (By Dale King, Realty News Report) – Home sales will increase significantly in 2025 as economic conditions improve and the tight supply of housing eases, according to a new forecast by the chief economist of the National Association of Realtors.
“The worst of the housing inventory shortage is coming to an end. Mortgage rates are stabilizing, and job additions are continuing,” predicted Lawrence Yun, chief economist for the NAR.
Yun offered a decidedly optimistic, forward-looking presentation to real estate professionals attending the NAR NXT, The Realtor Experience convention held in Boston earlier this month.
In an upbeat forecast, as if peering into his crystal ball, Yun said that “directionally, I think there’s going to be roughly a 10 percent boost of existing-home sales in 2025 and 2026.”
In a positive comment about home buiding, Yun also projected that new home sales will be 11 percent higher in 2025 and 8 percent greater in both 2025 and 2026.
The top economist told home market specialists gathered in the Bay State capital that he gleaned his data by analyzing the current state of the U.S. residential real estate market.
“Over the years, you see your past clients doing well because they’re homeowners,” Yun told the audience. He said this situation is the “intangible value that [Realtors] provide.”
During his presentation, Yun discussed the troubles that befell the real estate sales market this year and also in 2023. “2024 has been a very difficult year on many fronts. We did not get the home sales recovery this year after an awful 2023.”
Accumulating Wealth: Home Ownership is Key
However, Yun explained to the group that household equity in real estate is at a record high. “This means there has been a huge increase in wealth for Realtors’ past clients — to the tune of $35 trillion.”
Yun used the figure as a jumping-off point to highlight what he called the glaring difference in estimated median net worth between homeowners ($415,000) and renters ($10,000) in 2024.
“Homeowners’ wealth steadily rises while renters’ wealth does not,” he 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.”
NAR’s top economist also highlighted the fact that the homeownership rate is much lower among younger Americans, and first-time home buyers are also having difficulties entering the ownership marketplace.
Yun pointed out that US job gains since the beginning of the COVID-19 pandemic (March 2020) have led to record-high payroll employment 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, who explained to the room filled with Realtors that “home sales depend mainly on jobs and mortgage rates.”
Regarding whether an acceleration of job growth is in the cards, Yun played it a bit cool, stating, “The stock market is very optimistic.”
Realty Under the Trump Administration
Yun also pointed the crowd’s attention to the mortgage rates that will descend upon the real estate market during Donald Trump’s second presidential term beginning in January 2025. He recalled that “mortgage rates in his first term (at 4 percent) were the good old days. Are we going to go back to 4 percent? Per my forecast, unfortunately, we will not. It’s more likely that we’ll go back to 6 percent. That will be the new normal — bouncing around 5.5 percent to 6.5 percent.”
He also said six-to-eight more Federal Reserve interest rate cuts are likely in the future. Yun reiterated the advice he offered the Fed chair on when to make these cuts: “My advice to Jerome Powell: do it in January rather than December.”
Yun expects there will be four different rounds of rate cuts in 2025.
In his speech, Yun addressed the status of the federal budget deficit. “Today, we have a massive deficit at a time when we are not in an economic recession,” he explained. “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.”
A Call for More Housing Supply
He also explained that another way to address the budget deficit is to bring down the price of housing.
“We have to have more supply,” said Yun. “Per our advocacy efforts, we’re trying everything we can to boost supply.”
Yun noted that 2023 was difficult for existing-home sales and 2024 looks like it will bow out on a similar note. However, he noted that an increase in pending home sales was recorded in September and helped pump up his forecast for improved existing-home sales.
Nov. 21, 2024 – Realty News Report, Copyright 2024
Photo by Ralph Bivins, Realty News Report, Copyright 2024
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