WASHINGTON – (By Dale King, Realty News Report) — Two economists from the National Association of Realtors offered optimistic, but somewhat cautionary predictions about the real estate market for the coming two years during NAR’s Economic and Real Estate Summit Friday focusing on residential and commercial markets.
Looking back over two years of mediocre home sales – the lowest in 30 years — NAR’s Chief Economist Lawrence Yun said he sees “light at the end of the tunnel” for 2025 and 2026. The number of dwellings on the real estate sales market “was falling, but we are getting more home sales, indicating that inventory is up.” He forecast “a huge boost in demand when interest rates come down.”
Mortgage rates have remained in the mid- to high-6 percent range for several weeks, it was reported at the NAR meeting.
Yun said he expects existing home sales to rise by 6 percent this year relative to 2024 and to finish 2025 at 4.3 million. New home sales are forecast to rise 10 percent this year.
In 2026, existing home sales should increase 11 percent and new home sales will level off at 5 percent.
NAR’s chief economist also anticipates the mortgage rate for 2025 will settle at about 6.4 percent, but will back off a bit in 2026, dropping just a tad to 6.1 percent.
In recent years the inventory of homes for sale has been extremely small. Right now, though, “the worst of the inventory shortage is over,” Yun said. “The chances of a recession are slim. Job additions continue. All the factors driving home sales are moving positively. Real estate professionals should expect more business opportunities this year.”
Economic Outlook
Yun opened the session with a look at the nation’s economy – a segment offering positive notes and concerning factors. He noted that during its meeting two days before the NAR summit, the Federal Reserve revised its projections for the country’s GDP and inflation, reducing both assessments.
“The previous estimate for the GDP was a respectable 2.1 percent. It was revised to 1.7 percent.” As to the fate of inflation, the Fed hiked the prediction from 2.5 percent to 2.7 percent.
Both downgrades, he said, were a direct result of President Donald Trump’s tariff proposals – measures Yun called “inflationary.”
“We don’t want stagflation,” he said. But the tariffs, Yun warned, could bring “slower growth and a little higher inflation.”
He did praise the President for his recent talks with the Russians about ending the war in Ukraine. “I’m sure they also talked about lowering oil prices,” which the NAR economist called “disinflationary.”
Cutting oil costs could help stem inflation and also reduce the cost of transporting goods to market. Yun pointed out that the cost of gasoline at the pump “is almost back to the pre-COVID level of $2 a gallon. A little more would be even better.”
Yun also lauded Trump’s support of deregulation, a move that would also be “disinflationary.”
On the employment front, he said, wage growth in the U.S. “is still above the level of inflation, meaning the standard of living is strong. Jobs are still being added, and many people are in the pipeline to buy real estate if conditions are right,” referring to lower mortgage rates.
CRE – Commercial Real Estate Markets
During the hour-long webinar, NAR Senior Economist Nadia Evangelou offered a rundown on the office and multi-family segments of the commercial market, concluding that she found “no single natural trend in either.” Both have been on “a roller coaster ride in the past few years” and results vary in different parts of the country.
She said the office sector “has struggled the most,” facing “companies still downsizing and vacancy rates increasing. Some wonder if the traditional office market has a future.”
But “we are seeing real signs of improvement. Vacancy levels are slightly lower than at the end of 2024, but we’re not out of the woods yet. Demand is stabilizing. Some areas have made full comebacks while others are still recording record high vacancy rates.”
The multifamily market, she said, is strong, but also faces challenges such as oversupply, which “could put pressure on rents.” She said the vacancy rate in the multifamily market is 8.1 percent and rent growth “is flat.”
“It’s not the same everywhere,” she pointed out, separating the apartment market into two divisions:
- 28 percent of metros (i.e., Chicago, Kansas City) are doing better than pre-pandemic levels. “There is still a healthy balance” sparked by high rent growth and lower vacancy rates.”
- 15 percent of metros (i.e., Austin, -4.3 rent growth; Denver, -3.2 rent growth) are enduring declining rent prices.
March 24, 2025 Realty News Report Copyright 2025
Photo: Realty News Report, Copyright 2025
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