NAR’s Chief Economist: Is the Worst Over?

According to NAR’s chief economist Lawrence Yun, the housing market may be on the path to recovery, which predicts improving inventory, stable mortgage rates, and continued job growth after a tough 2023 and 2024. He anticipates a 10% increase in existing home sales by 2025 and 2026, with new home sales potentially rising by 11% in 2025 and 8% in 2026. Yun also expects median home prices to increase by 2% each year for the next two years.

Interest rates, however, are unlikely to drop back to the 4% level seen in past years. Yun forecasts a “new normal” for mortgage rates, fluctuating between 5.5% and 6.5%, with no more than six to eight rate cuts by the end of 2025. He attributes the higher rates to government borrowing to cover budget deficits, which limits mortgage funds available. Yun notes that if the new administration implements a credible plan to reduce the deficit, mortgage rates could decrease further.

NAR Economist Forecasts 9% Home Sales Rise in 2025, 13% in 2026 with Rates Near 6%

Lawrence Yun, Chief Economist for the National Association of Realtors, shared an optimistic outlook for the housing market at the NAR’s forum in Boston. He highlighted that the inventory shortage may be easing, mortgage rates are stabilizing, and job growth is strong, signaling potential improvement in 2025. Yun noted that homeowner equity has hit a record $35 trillion, with a significant wealth gap between homeowners and renters. He advised that those entering the housing market sooner are more likely to build wealth, contrasting renters’ limited financial growth with the robust gains of homeowners.

Looking ahead, Yun forecasted a 10% boost in existing home sales by 2025-2026 and projected new home sales to increase by 11% in 2025 and 8% in 2026, with median home prices rising 2% each year. He cautioned that interest rates, which grew significantly in 2024, are unlikely to return to 4% levels, stabilizing instead around 5.5%-6.5%. Yun also called for increased housing supply to address affordability issues and advised that reducing the budget deficit could help lower mortgage rates in the future.

Mortgage Applications Rise in Latest MBA Survey

Mortgage applications rose 0.5% last week, marking the first increase in seven weeks, despite rising mortgage rates, according to the Mortgage Bankers Association. The seasonally adjusted Market Composite Index, a measure of total mortgage application volume, saw a slight boost, while the Purchase Index increased by 2%. Refinance applications fell 2% but remain significantly higher than a year ago. In particular, FHA and VA purchase applications grew by 3% and 9%, respectively, likely due to lower FHA rates.

Mortgage rates, however, continued their climb, with the average rate for a 30-year fixed-rate loan rising to 6.86%, its highest since July 2024. Rates for 30-year jumbo loans also increased, but FHA-backed mortgages saw a slight rate decrease. The steady rate rise led to reduced refinance activity, now at its lowest since May 2024, while adjustable-rate mortgage (ARM) shares fell slightly.