The U.S. housing market is expected to experience modest growth in 2025, according to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR). Yun projects a 3% increase in the national median home price and anticipates a rebound in home sales during the latter half of the year, following a period of subdued activity.
Speaking at the REALTORS® Legislative Meetings in Washington, D.C., Yun emphasized that while the market has faced challenges, it is not on the brink of a significant downturn. “Home prices are not on the verge of a nuclear crash,” he stated, highlighting low levels of serious mortgage delinquencies as a sign of market stability.
Yun’s forecast includes a 6% rise in existing-home sales and a 10% increase in new-home sales for 2025. These projections are contingent upon mortgage rates easing to around 6.4% by the end of the year and continued job market growth, with an estimated 1.6 million jobs added to the economy.
Despite these optimistic projections, the housing market continues to grapple with several challenges. Elevated mortgage rates, which have hovered between 6.62% and 6.89%, have dampened buyer demand. Additionally, the national median home price reached a record $422,800 in May, further straining affordability.
Inventory levels have shown some improvement, with a 20.3% increase from the previous year, totaling 1.54 million homes. However, this figure remains below pre-pandemic levels, and the average time homes spend on the market has extended to 27 days.
The market has also seen a rise in canceled home purchase agreements, with 6% of pending sales falling through in May, up from 5% a year earlier. Factors contributing to these cancellations include unexpected costs, changes in finances or employment, and low appraisals.
Looking ahead, Yun remains cautiously optimistic. He predicts that mortgage rates will average 6.4% in the second half of 2025 and decrease to 6.1% in 2026. Correspondingly, he forecasts a 4% increase in the median home price in 2026, along with an 11% rise in existing-home sales and a 5% uptick in new-home sales.
Yun also highlighted the significant wealth gap between homeowners and renters, noting that in 2024, the median net worth of homeowners was $415,000 compared to $10,000 for renters. This disparity underscores the long-term financial benefits of homeownership.
In conclusion, while the U.S. housing market faces ongoing challenges, including high mortgage rates and affordability concerns, projections for 2025 suggest a period of modest growth and gradual recovery, contingent upon favorable economic conditions and interest rate trends.