11/20/2024
NAR Economists Discuss Predictions on Home Sales, Mortgage Rates, and Key Factors Impacting the Real Estate Market
In Boston last Friday, Lawrence Yun, Chief Economist of the National Association of REALTORS® (NAR), shared an optimistic outlook on the 2025 and 2026 housing markets. Speaking at NAR NXT, The REALTOR® Experience, he addressed real estate professionals about potential trends, including higher home sales and easing mortgage rates. This more positive forecast suggests that the challenges of the last two years may be behind us, setting the stage for recovery.
Key Predictions for 2025
Yun forecasts a rise in both existing and new home sales, projecting a 9% increase in existing-home sales and an 11% rise in new-home sales. These gains are expected to continue into 2026, with anticipated increases of 13% for existing-home sales and 8% for new-home sales. Yun pointed to improving job numbers and stock market gains, predicting that around 2 million jobs will be added in both 2025 and 2026, which may encourage more Americans to enter the housing market.
Jessica Lautz, NAR’s Deputy Chief Economist, also presented recent data reflecting shifts in home-buying trends. Lautz highlighted a rise in all-cash buyers, multigenerational purchases, and single buyers. Buyers increasingly reflect a changing demographic with more households pooling resources to purchase homes.
Mortgage Rates Stabilize
Mortgage rates have fluctuated recently, but Yun expects them to stabilize on the lower end of recent ranges for 2025 and 2026. While the Federal Reserve has cut interest rates twice this year and may continue in 2025, Yun cautioned that budget deficits may limit the potential for significant rate reductions, preventing a drop to the low rates of previous years. However, factors like a smaller deficit, relaxed building regulations, or labor force growth could lead to faster rate declines.
Gradual Home Price Growth
Yun projects moderate increases in home prices over the next two years, with median prices reaching approximately $410,700 in 2025 and $420,000 in 2026—up 2% each year. Rising prices have generated significant equity for homeowners, increasing the wealth gap between homeowners and renters. Yun noted that more housing supply could temper future price increases, making homeownership more accessible.
Shifts in Buyer Demographics
The demographic profile of home buyers is evolving, according to NAR’s 2024 Profile of Home Buyers and Sellers. The data reveals several trends:
- More All-Cash Purchases: All-cash buyers now make up 26% of sales, driven by equity gains among repeat buyers.
- Older First-Time Buyers: The median age of first-time buyers has risen to 38. Many are saving longer or relying on financial support from family.
- Return to Urban Living: After years of suburban moves, there is a renewed interest in city centers.
- Increase in Multigenerational Homes: Due to cost-saving needs, multigenerational households are at an all-time high of 17%.
- More Single Women Buyers: Single women are buying at double the rate of single men, making up 24% of the market share, compared to 11% for single men.
Source: https://www.nar.realtor/
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