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U.S. home sales will likely decline by 18% this year, compounding a 17% reduction from last year – but next year should see a 15% increase in sales activity, according to a forecast from National Association of Realtors (NAR) Chief Economist Lawrence Yun.

Speaking at the Residential Economic Issues and Trends Forum in the 2023 NAR NXT conference, Yun acknowledged the continued situation where the absence of inventory has helped to keep home prices high, thus “making it super difficult for first-time buyers to enter the housing market.” However, he declared the 30-year mortgage and Fed funds rates have likely crested.

“I believe we’ve already reached the peak in terms of interest rates,” Yun said. “The question is when are rates going to come down?”

Yun forecasted interest rates will drop to between 6% and 7% by the spring buying season, at which time more sellers will feel comfortable enough to list their properties.

“Pent-up sellers cannot wait any longer. People will begin to say, ‘life goes on,’” said Yun. “Listings will steadily show up, and new home sales will continue to do well. Existing home sales will rise by 15% next year.”

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