The worst of the housing inventory shortage is coming to an end, mortgage rates are stabilizing and job additions are continuing, according to NAR Chief Economist Lawrence Yun.

Yun analyzed the current state of the U.S. residential real estate market and shared his 2025-2026 outlook today during the Residential Economic Issues and Trends Forum at 2024 NAR NXT, The REALTOR® Experience, in Boston, Massachusetts.

“Over the years, you see your past clients doing well, because they’re homeowners,” explained Yun. “There’s an intangible value that [Realtors®] provide.

“2024 has been a very difficult year on many fronts. We did not get the home sales recovery this year after an awful 2023.”

However, Yun explained that household equity in real estate is at a record high. This means there has been a huge increase in wealth for Realtors®’ past clients, to the tune of $35 trillion. Yun highlighted the glaring difference in estimated median net worth between homeowners ($415,000) and renters ($10,000) in 2024.

“Homeowners’ wealth steadily rises while renters’ wealth does not,” said Yun. “If you don’t enter the housing market, you are 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 accumulate wealth.”

Yun also highlighted that the homeownership rate is much lower among younger Americans, and first-time home buyers are having trouble entering the market.

Yun pointed out that US job gains since the beginning of the COVID-19 pandemic (March 2020) have led to record-high payroll employment as of September 2024.

“When more people work, they have the capacity or they’re in a better position to buy a home,” stated Yun.

Yun explained to the room of Realtors® that, “Home sales depend mainly on jobs and mortgage rates.”

Regarding whether we are going to see an acceleration of job growth, Yun stated, “The stock market is very optimistic.”

Yun addressed mortgage rates during a second Donald Trump presidency, saying, “Mortgage rates in his first term (at 4%) were the good old days. Are we going to go back to 4%? Per my forecast, unfortunately, 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 we can expect six-to-eight more interest rate cuts. He also gave advice to the chair of the Federal Reserve on when to make these cuts: “My advice to Jerome Powell: do it in January, rather than December.”

Yun expects there will be four different rounds of rate cuts in 2025. He also addressed the budget deficit.

“Today, we have a massive budget deficit at a time when we are not in an economic recession,” explained Yun. “Clearly president-elect Trump will not stop tax cuts – he will extend or expand them.”

Yun added, “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.” He also explained that another way to address the budget deficit is to bring down the price of housing.

“We have to have more supply,” said Yun. “Per our advocacy efforts, we’re trying everything we can to boost supply.”

Yun noted that 2023 was difficult for existing-home sales and 2024 looks to be the same. However, he flagged that we did get an increase in pending home sales in September and provided his forecast for existing-home sales.

“Maybe the worst is coming to an end,” added Yun. “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. Yun forecasts the median home price to be 2% higher in both 2025 and 2026.

About the National Association of Realtors®

The National Association of Realtors® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term Realtor® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of Realtors® and subscribes to its strict Code of Ethics. For free consumer guides about navigating the homebuying and selling transaction processes – from written buyer agreements to negotiating compensation – visit facts.realtor.