The worst of the housing inventory shortage is coming to an end, mortgage rates are stabilizing and job additions are continuing, according to Lawrence Yun, NAR chief economist.
“2024 has been a difficult year on many fronts. We didn’t get the home sales recovery this year after an awful 2023,” says Yun.
However, household equity in real estate is at a record high, Yun continues. This means there’s been a massive increase in wealth for Realtors’ past clients – to the tune of $35 trillion and an estimated median net worth between homeowners ($415,000) and renters ($10,000) in 2024.
“Homeowners’ wealth steadily rises while renters’ wealth does not,” says Yun. “If you don’t enter the housing market, you’re 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 begin to accumulate wealth.”
U.S. job gains since the beginning of the COVID-19 pandemic (March 2020) have led to record-high payroll employment as of September 2024, Yun notes.
“When more people work, they have the capacity, or are in a better position, to buy a home. Home sales depend mainly on jobs and mortgage rates.”
Regarding whether the U.S. is going to see an acceleration of job growth, Yun says the stock market is “very optimistic.”
Concerning mortgage rates during a second Donald Trump presidency, Yun says, “Mortgage rates in his first term (4%) were the good old days. Are we going to go back to 4%? Per my forecast, 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%.”
Yun said the U.S can expect several more interest rate cuts. His advice to Jerome Powell, the chair of the Federal Reserve, about when to make these cuts: “Do it in January rather than December.”
Yun expects there will be four different rounds of rate cuts in 2025.
With respect to the budget deficit, Yun says president-elect Trump will not stop tax cuts but rather will extend or expand them.
“We have a massive budget deficit at a time when we are not in an economic recession. 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.”
Yun also explained that another way to address the budget deficit is to bring down the price of housing.
“We have to have more supply. Per our advocacy efforts, we’re trying everything we can to boost supply.”
Yun remarks that 2023 was difficult for existing-home sales and that 2024 could offer more of the same. However, he flags that the U.S did see an increase in pending home sales in September, which could be an indication of better things to come.
“Maybe the worst is coming to an end. Directionally, I think there’s going to be roughly a 10% boost of existing-home sales in 2025 and 2026.”
Yun projects new home sales to be 11% higher in 2025 and 8% higher in 2026. He also forecasts the median home price to be 2% higher both years.