During a forum held June 3 in Washington, D.C., Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), offered a cautiously optimistic outlook for the U.S. housing market heading into 2025. Speaking at the Realtors Legislative Meetings, Yun projected that the residential real estate sector is on a slow path to recovery, buoyed by steady economic fundamentals despite the drag of elevated mortgage rates.
Yun forecasted that existing-home sales will increase by 6% in 2025, marking a rebound from the stagnation and declines experienced over the past two years. Additionally, he anticipates a 10% jump in new-home sales, driven in part by ongoing demand and the relative flexibility of homebuilders in pricing and incentives. Meanwhile, the national median home price is expected to rise about 3%, a modest gain that reflects continued inventory constraints and strong labor market conditions.
Mortgage rates, Yun noted, are expected to remain relatively high, hovering around 6.4% during the second half of the year. This level is significantly above the pandemic-era lows but could still offer some relief to prospective buyers if the Federal Reserve begins to ease interest rates as inflation stabilizes.
“The housing market is showing signs of a delayed but still tangible recovery,” Yun said. “While affordability remains a challenge, especially for first-time buyers, there are encouraging signals that suggest the worst may be behind us.”
Yun emphasized that the forecasted recovery hinges heavily on the broader economic environment, particularly job growth and the Federal Reserve’s monetary policy. He expects the U.S. economy to generate approximately 1.6 million jobs in 2025, reinforcing household formation and supporting demand for housing. He also cited the current low levels of mortgage delinquencies as a positive indicator of consumer financial health, further buttressing the housing market’s foundation.
The NAR economist cautioned, however, that higher borrowing costs continue to exert pressure on both buyers and sellers. Many homeowners with ultra-low interest rates are reluctant to sell, thereby limiting inventory and exacerbating price pressures. This “lock-in effect” has contributed to the sluggish pace of sales, particularly in markets where home prices remain elevated.
Even with these headwinds, new-home construction has emerged as a bright spot in the market. Builders have been more responsive to changing market dynamics, adjusting pricing and offering incentives such as rate buydowns to entice buyers. As a result, new-home sales have performed better than existing-home transactions, a trend Yun expects to continue into 2025.
Yun’s comments come at a time when housing market analysts are closely watching for signs of stabilization. According to recent data from the U.S. Census Bureau and the Department of Housing and Urban Development, housing starts and permits are beginning to recover from earlier lows, signaling cautious optimism among builders. Meanwhile, consumer sentiment around home buying, while still subdued, has improved marginally as wage growth outpaces inflation in some regions.
Still, significant challenges remain. Affordability continues to be a major issue, particularly in high-cost metropolitan areas. According to CBRE and other industry analysts, many potential buyers remain sidelined due to the combination of high prices and borrowing costs. The inventory shortage—especially for entry-level homes—has further constrained options for those looking to enter the market.
Housing policy experts say more needs to be done to boost supply and improve affordability. Proposals include zoning reform, subsidies for first-time buyers, and expanded funding for affordable housing development. Yun underscored the role of policymakers in facilitating long-term solutions to these structural issues, noting that “supply is ultimately the key to sustainable affordability.”
In summary, while the U.S. housing market is unlikely to see a dramatic rebound in the coming year, the outlook for 2025 suggests a slow but steady recovery. Homebuilders are expected to play a critical role in meeting demand, while existing homeowners and buyers continue to navigate a high-rate environment. As mortgage rates ease slightly and job growth continues, industry leaders like Yun remain hopeful that housing activity will gradually regain its footing.