The National Association of REALTORS®’ Chief Economist Lawrence Yun forecasted that interest rates will fall in the long term, 2024 existing-home sales will rise to 4.46 million (up 9% from 4.09 million in 2023) and 2025 existing-home sales will increase to 5.05 million (up 13.2% from 2024)—with further gains in eight of the next 10 years—during the Residential Economic Issues & Trends Forum at NAR’s 2024 REALTORS® Legislative Meetings.
Yun also explained that rents will calm down further, which will hold down the consumer price index (CPI) and make the Federal Reserve cut interest rates.
Yun said that based on April’s employment data, there are six million more jobs compared to the pre-Covid highs, and jobs are boosting home prices.
“More jobs mean more home sales and higher housing demand,” said Yun. “You need a strong local economy for a strong housing market.”
Yun discussed the wealth comparison between homeowners and renters. In 2022, the median net worth of homeowners was $396,200, while the median net worth of renters was $10,400.
“The referral business is key,” Yun told a crowd of REALTORS®. “Your past clients are super happy in terms of their wealth gains. Seven percent mortgage rates are high compared to a couple of years ago, but you have to buy a home in order to build wealth. Have Americans lost the dream of homeownership? I don’t think so.”
Yun made several comparisons to 1995. The U.S. currently has 40 million more total payroll jobs and 70 million more people than in 1995. However, annual existing-home sales in 2023 experienced their worst year since 1995. So far in 2024, monthly existing-home sales rates have struggled to climb above last year’s level.
“How is it that home sales can be this low when we’ve got so many people living in this country?” asked Yun. “High mortgage rates and lack of inventory were a shock. Over the next 10 years, probably eight of those 10 years will improve for home sales.”
Yun touched on housing inventory saying, “Not all housing demand is being satisfied, due to lack of supply. We are looking at advocacy policies to counteract that.”
“Mortgage rates are very important,” explained Yun. “The Federal Reserve has delayed rate cuts. I would have thought that, by now, rates would be lower and rate cuts would have begun. Whatever rate cut the Federal Reserve does not do this year will simply get pushed back to 2025. They’re calling for a September rate cut, but we’ll see.”
Yun discussed how the 30-year mortgage and federal funds rate are in a high-rate environment. He explained that the monthly payment for first-time home buyers – with a 10% down payment and 80% of median home price – has gone up significantly during Covid, doubling the cost.
Yun noted that homeowners are happy. According to NAR data (2023 Profile of Home Buyers and Sellers), nine out of 10 buyers (89%) relied on the services of a real estate agent or broker. Of those, there is a 90% satisfaction rate – they would use their agent again or recommend their agent to others.
Yun questioned whether the immense size of the government deficit is further pressuring rising rates. He addressed government spending: “Four years out from the start of the pandemic, the U.S. is spending money as if we’re still in the heights of Covid-19.”
“We had a massive budget deficit while experiencing a good economy, meaning low unemployment,” said Yun. “People may get used to permanently high inflation, and people will be looking for an inflation hedge. Real estate is proven.”
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