NAR Chief's Housing Market Predictions for 2025 and 2026

Looking to the future, experts predict a strong recovery in the housing market by 2025 and 2026, with home sales set to increase significantly. Projections indicate a 9% rise in home sales in 2025, followed by an even more robust 13% growth in 2026. This positive forecast is largely driven by stabilizing mortgage rates, which are expected to hover around 6%. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), these trends signal a potential turning point after a period marked by high borrowing costs and low inventory.

Key Predictions for the Housing Market in 2025 and 2026

• 9% increase in home sales forecasted for 2025.
• 13% increase in home sales expected in 2026.
• Mortgage rates are likely to stabilize around 6%.
• The housing inventory shortage may be easing.
• Home prices are projected to rise by 2% in both 2025 and 2026.
• Homeownership remains a key factor in wealth accumulation, widening the financial divide between homeowners and renters.

While the U.S. housing market has faced numerous challenges in recent years—such as fluctuating interest rates, economic uncertainty, and a tight housing supply—there is growing optimism for the coming years. Lawrence Yun, speaking at a recent forum in Boston, highlighted factors like job growth, stabilized interest rates, and rising household equity as signs that the market is poised for a recovery.

Current Housing Market Overview

2024 has presented its own challenges, following a lackluster 2023. Many potential buyers have been hesitant to enter the market due to high mortgage rates and historically low housing supply, with first-time homebuyers facing particular difficulty. A significant wealth gap exists between homeowners and renters, with homeowners’ median net worth around $415,000, compared to just $10,000 for renters. This stark difference emphasizes the long-term financial benefits of homeownership, particularly as property values continue to appreciate.

Given that household equity in real estate is at record highs, now may be an ideal time for prospective buyers to consider entering the market.

Forecast for Home Sales

Looking ahead, Yun anticipates a strong rebound in home sales. He forecasts a 9% increase in sales for 2025, followed by a 13% rise in 2026. Job growth will play a critical role in this recovery, with more buyers expected to enter the market as employment strengthens across various sectors, providing the financial security needed to make such a significant investment.

Mortgage Rate Stabilization

While mortgage rates are unlikely to return to the historically low 4% range, Yun expects rates to stabilize between 5.5% and 6.5%. These levels are expected to become the new norm, making home financing more accessible. Yun also predicts that interest rate cuts could provide additional relief to buyers, with four rate reductions expected in 2025.

Home Price Predictions

In addition to the sales forecast, Yun expects moderate increases in home prices over the next few years, predicting a 2% rise in median home prices for both 2025 and 2026. This gradual growth reflects a balance between stabilizing buyer demand, a slight increase in housing supply, and the ongoing long-term appreciation of home values.

These incremental price increases are expected to maintain housing affordability, though regional price fluctuations may occur depending on local market conditions.

Economic Factors Shaping the Housing Market

Several economic factors are influencing the trajectory of the housing market. The strong job market post-pandemic and record-high household equity provide a solid foundation for growth in home sales. Yun underscores the close connection between job growth and homeownership potential, noting that a growing workforce leads to greater demand for housing.

Moreover, the inventory shortage may be easing as builders increase production to meet demand, gradually improving supply and bringing more balanced pricing to the market.

The Wealth Gap: Homeowners vs. Renters

Yun highlights a significant wealth disparity between homeowners and renters. Homeowners accumulate equity over time through mortgage payments and the appreciation of property values, while renters typically see little to no wealth growth. This disparity emphasizes the financial advantages of homeownership, particularly in light of projected price increases and potential stabilization of housing inventory.

This wealth gap is particularly challenging for younger Americans, many of whom are first-time buyers. However, with more affordable housing options expected and potential rate cuts on the horizon, there is hope that these individuals may soon find opportunities to enter the market.

Regional Market Trends

While national trends provide a general outlook, regional market conditions will significantly impact housing dynamics. Areas with strong job growth or significant investments in infrastructure may see above-average increases in home sales and property values. Conversely, regions with slower economic growth may struggle to keep up with national trends.

Conclusion

In summary, the housing market for 2025 and 2026 is shaping up to offer an optimistic outlook, driven by job growth, stable mortgage rates, and easing inventory shortages. While challenges remain, these next few years present significant opportunities for growth in home sales.

The success of this recovery will depend on how effectively key market players—including builders, real estate professionals, and policymakers—respond to evolving economic conditions. For those considering homeownership, the coming years may present an ideal time to enter the market.