The State of Real Estate – National Association of Realtors (NAR) Chief Economist Speaks
Lawrence Yun, speaking at NAR’s 2025 Realtors Legislative Meetings in Washington, DC, predicted existing home sales will increase by 6% this year and by 11% next year. But while Yun expected sales to slow through the end of next year, Yun stated the median home price will climb by 3% in 2025 and by 4% in 2026. He also believes mortgage rates will average 6.4% in the second half of 2025 and 6.1% in 2026.
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 Chairman 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. But remember, 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, which creates a higher yield and hence higher mortgage rates. What is needed is for our country’s economic policies to show growth and certainty without fear of inflation.
National Growing Inventory: A total of $698 billion worth of US homes are listed for sale as of April, according to new data from Redfin. This marks a 20.3% increase from one year ago and the highest dollar amount recorded since Redfin began tracking this data in 2012. This new record was achieved as the US housing supply soared 16.7% year-over-year, the highest inventory since pre-pandemic 2019. The number of homes for sale has topped 1 million for the first time since the winter of 2019, according to data from Realtor.com. However, only metros in the Southern or Western United States have fully returned to pre-pandemic inventory levels. Also in May, 19.1% of listings featured reduced prices, the highest share for any May since at least 2016. The metros with the most price reductions were mostly in the USA’s west and south, including Phoenix (31.3%), Tampa (29.9%), and Denver (29.4%).
Not only are there more homes for sale than there have been in five years, but the value of those homes is higher than it has ever been. So, expect rising inventory, weakened demand, and the prevalence of stale supply (homes that have been on the market a long time) to push home prices down a little by the end of this year. We do not expect this to be a long-term market shift, especially if economic certainty and consumer confidence returns and interest rates come down a little.
As always, The Kolb Team is here to help with all your real estate needs!
The Kolb Team
