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Chief Economist Forecasts Housing Market Recovery in 2025

by Adam Sobel

2025 Housing Market Predictions: Lawrence Yun's Forecast at NAR NXT Conference

At the recent NAR NXT conference in Boston, Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), shared his housing market predictions for 2025. His insights covered key factors shaping the market, including home sales, home prices, and mortgage rates—each of which will play a critical role in the real estate landscape in the coming year.

Home Sales Projections: A Recovery on the Horizon

After two years of turbulence, Yun's forecast suggests the housing market is on the path to recovery. With rising employment rates and an improving economy, home sales are expected to increase. Yun also pointed to the stability that often follows a presidential election, which tends to alleviate market uncertainty.

“We’ve seen that after presidential elections—regardless of who wins—there’s usually a slight uptick in home sales,” Yun explained. “The outcome removes some uncertainty. Once you know the policy direction, you can make informed decisions about the market.”

2025 Home Sales Projections:

Existing Home Sales: +9% year-over-year
New Home Sales: +11%

2026 Home Sales Projections:

Existing Home Sales: +13% year-over-year
New Home Sales: +8%

Yun also noted that the housing inventory shortage is easing, with more homes—both new and existing—expected to enter the market. This increase in inventory could help meet the pent-up demand driven by a growing U.S. population.

Household Equity: The Wealth Gap Between Homeowners and Renters

One of the most striking points Yun made was the role of homeownership in wealth building. According to Yun, household equity in real estate has reached an all-time high, which contributes to a significant wealth gap between homeowners and renters.

In 2024, the median net worth of homeowners is a substantial $415,000, compared to just $10,000 for renters. This growing wealth disparity underscores the financial benefits of owning a home, yet Yun acknowledged that younger Americans are facing increasing barriers to homeownership. In fact, the share of first-time homebuyers dropped to a record low of 24% last year, down from 32% in previous years.

However, Yun emphasized the long-term financial security homeownership can offer:

“Homeowners’ wealth steadily rises while renters’ wealth does not. If you don’t enter the housing market, you remain in the renter class, where wealth is not being accumulated. The sooner you enter, the sooner you start building equity,” said Yun.

Home Price Projections: Modest Growth Ahead

The rapid increase in home prices over the past few years has been a major trend, but Yun forecasts more moderate price growth moving forward. While homeowners have enjoyed substantial equity gains, Yun predicts that home price increases will align more closely with wage growth in the coming years, helping to reduce the wealth gap between homeowners and renters.

Median Home Price Projections:

2025: $410,700 (+2% over 2024)
2026: $420,000 (+2% over 2025)

Yun also warned against the unsustainable nature of the recent surge in home prices. “If home prices continue to rise at the current pace, we risk creating a divided society, with only a few benefiting from tremendous housing wealth,” he said. “By increasing supply, we can stabilize home prices and bring them more in line with wage growth.”

Mortgage Rate Forecast: Stabilization, But Not a Return to Pre-2020 Levels

Mortgage rates remain a critical factor influencing the housing market. This year, 30-year fixed-rate mortgages have fluctuated between 6.08% and 7.44%, and Yun predicts rates will stabilize toward the lower end of this range over the next two years. However, despite recent Federal Reserve rate cuts, Yun cautioned that mortgage rates are unlikely to drop dramatically due to ongoing budget deficits limiting available mortgage funds.

Factors that could help lower mortgage rates include:

Reduced budget deficits
Relaxed housing regulations for builders
A stronger labor force

However, Yun stressed that a return to the sub-4% mortgage rates seen during the previous administration is highly unlikely. “The 4% mortgage rates we saw in the past were the ‘good old days,’” he said. “Unfortunately, we won’t return to those levels. The new normal is likely to be around 5.5% to 6.5%.”

Looking Ahead: A Balanced Market in 2025 and Beyond

Yun’s predictions suggest that the housing market will gradually recover in the next few years, with increased home sales and a stabilizing inventory. While home prices and mortgage rates are expected to grow more modestly, homeownership remains one of the best ways to build wealth over time. For first-time buyers, entering the market sooner rather than later will be key to taking advantage of long-term financial security.