National Association of Realtors (NAR) Chief Economist Lawrence Yun is predicting interest rates will fall in the long term, while existing home sales will rise to 4.46 million this year (up 9% from 4.09 million in 2023) and to 5.05 million next year (up 13.2% from 2024).
In a presentation during the Residential Economic Issues & Trends Forum at NAR’s 2024 Realtors Legislative Meetings, Yun also predicted a calming in the rental housing market that will hold down the consumer price index and spur the Federal Reserve to cut interest rates.
“More jobs mean more home sales and higher housing demand,” said Yun. “You need a strong local economy for a strong housing market.”
Yun also discussed the wealth comparison between homeowners and renters, noting the 2022 median net worth of homeowners was $396,200 while the median net worth of renters was $10,400.
“The referral business is key,” Yun continued, telling his realtors audience, “Your past clients are super happy in terms of their wealth gains – 7% mortgage rates are high compared to a couple of years ago, but you have to buy a home in order to build wealth. Have Americans lost the dream of homeownership? I don’t think so.”
Still, he acknowledged annual existing home sales in 2023 experienced their worst year since 1995.
“How is it that home sales can be this low when we’ve got so many people living in this country?” asked Yun. “High mortgage rates and lack of inventory were a shock. Over the next 10 years, probably eight of those 10 years will improve for home sales. Not all housing demand is being satisfied, due to lack of supply. We are looking at advocacy policies to counteract that. Mortgage rates are very important. The Federal Reserve has delayed rate cuts. I would have thought that, by now, rates would be lower and rate cuts would have begun. Whatever rate cut the Federal Reserve does not do this year will simply get pushed back to 2025. They’re calling for a September rate cut, but we’ll see.”
;
I think interest rates around 7% will be the new normal. Remember, the last time interest rates were in the 3s was back around 2000. So unless there is some political event, don’t expect anything better.
The core problem lies in resetting property taxes to the future State Equalized Value (SEV) rather than the current taxable value. It is illogical for an existing homeowner to pay taxes based on the taxable value, which is already substantial, while a new owner pays twice the tax amount when assessed against an arbitrary SEV. Currently, a new homeowner may end up paying $300.00 more per month for the same services that their neighbor receives. If a community requires additional funds, all homeowners should contribute equally.