The chief economist with the National Association of Realtors (NAR) has defined today’s housing market as a challenging environment burdened by circumstances beyond its control.
Speaking at NAR’s 2025 Realtors Legislative Meetings in Washington, DC, Lawrence Yun predicted existing home sales will increase by 6% this year and by 11% next year. He also forecasted new home sales will rise by 10% in 2025 and by 5% in 2026.
But while Yun expected sales to slow through the end of next year, he stated the median home price will climb by 3% in 2025 and by 4% in 2026. He stated mortgage rates will average 6.4% in the second half of 2025 and 6.1% in 2026.
“The housing market remains very difficult at the moment, as you know,” he said. “Part of the delay in recovery is because the Federal Reserve has changed its outlook and appears to be on pause for a longer period.”
Yun complained that the “fast ascent of mortgage rates has really hurt the real estate market,” adding that new homebuyers are being burdened with elevated mortgage payments.
“This is what’s killing the housing market,” he continued. “Mortgage rates are the magic bullet, and we’re waiting and waiting until those come down.”
As for hoping that Jerome Powell’s Federal Reserve will offer a cavalry-worthy rescue, Yun observed that the inflation rate of 2.3% is outside of the central bank’s 2.0% implicit target that would trigger a new round of rate cuts.
“We’re not there yet, but we’re very close. The Fed will cut interest rates once inflation is fully under control,” he said.
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Yes, the economic fluctuations have caused a lot of instability and has hurt consumer confidence. The Fed does not feel comfortable adjusting the rates given that uncertainty. While a reduction in the Fed rate may possibly help, mortgage rates are more tied to the 10 year treasury bond. Because of the economic instability, fewer people are investing in these bonds, creating a higher yield and hence higher mortgage rates. What we need is for our country’s economic policies to show growth and certainty without free of inflation and costs rising.
We need to stop special interest groups from getting in the way and start building more affordable housing. Government needs to step in and get the ball rolling on new affordable housing. The private sector is all for higher profits and they’re not helping in a time of much needed new affordable housing.
Lowering interest rates isn’t the magic bullet. With a shortage of available homes in many markets, lower rates will just increase prices. We need to (1) Build more affordable homes (2) Slow investment groups from purchasing so many first time buyer homes (3) Create affordable alternatives for people downsizing. You need to have a handle on the big picture and an action plan.