Housing Market Predictions for 2025 and 2026 by NAR Chief

As we dive into Housing Market Predictions for 2025 and 2026, experts are projecting a notable increase in home sales, with estimates showing a 9% increase for 2025 and an impressive 13% increase for 2026. This optimistic forecast is largely attributed to stabilizing mortgage rates, which are expected to hover around 6%. According to NAR Chief Economist Lawrence Yun, we might finally be turning a corner after a challenging period marked by high borrowing costs and low inventory.

Housing Market Predictions for 2025 and 2026: What to Expect?

Key Takeaways

• 9% increase in home sales predicted for 2025.
• 13% increase in home sales expected for 2026.
• Mortgage rates are stabilizing, likely to be around 6%.
• The worst of the housing inventory shortage may be ending.
• Homeowners are projected to see a 2% increase in home prices in both 2025 and 2026.
• Homeownership is connected to wealth accumulation, highlighting the significant financial gap between homeowners and renters.

The U.S. housing market has faced various hurdles in recent years, largely due to fluctuating interest rates, economic uncertainty, and a limited supply of homes. However, as we approach 2025 and 2026, there are signs of optimism. Lawrence Yun presented his predictions during a recent forum in Boston, discussing how job growth, interest rate stabilization, and increased household equity point toward a rebound in the housing market.

The Current State of the Housing Market

2024 has been a notably tough year for home sales, following a lackluster 2023. The National Association of Realtors (NAR) has noted that many prospective buyers found themselves hesitant due to rising mortgage rates and a historically low inventory of available homes. An unfortunate reality that many first-time homebuyers face is the stark difference in wealth accumulation between homeowners and renters.

Yun indicates that the median net worth for homeowners stands at approximately $415,000, while for renters, it is merely $10,000. This sizeable gap underscores the long-term benefits of homeownership: building wealth over time as property values increase. With household equity in real estate reaching record highs, now is an optimal time for individuals to consider entering the housing market sooner rather than later.

Predictions for Home Sales

Looking ahead, Yun forecasts an uptick in home sales that could mark a significant recovery for the U.S. housing market. He predicts a 9% increase in home sales for 2025 and a 13% increase for 2026. This recovery is expected to be greatly influenced by the effectiveness of job growth. With continued job additions across various sectors, potential homebuyers are more likely to explore their options in the housing market, as employment stability gives them the confidence to commit to a major purchase.

The Stabilization of Mortgage Rates

In discussions surrounding mortgage rates, Yun notes that while we may not return to the 4% range experienced during the previous administration, rates are expected to stabilize between 5.5% and 6.5%. He emphasizes that these levels may represent the new normal for borrowers. His insights suggest that with the anticipated interest rate cuts—potentially four rounds set for 2025—there could be further relief for buyers, making home financing more accessible.

The question of whether mortgage rates will decline significantly remains, however. There is a growing consensus that while we may see some cuts, the reduction might not be as steep or quick as some are hoping for. Homebuyers should prepare for a market where the average mortgage rate lingers around 6% for the foreseeable future.

Home Price Predictions

Alongside predictions for home sales, Lawrence Yun anticipates that home prices will increase gradually in the coming years. Specifically, he forecasts a 2% increase in median home prices in both 2025 and 2026. This moderate growth in home prices can be attributed to a combination of stabilizing demand from buyers, a gradual increase in housing supply, and persistent appreciation in home values over the long term.

As the market stabilizes, these slight increases in home prices reflect a steady recovery rather than a sudden spike, which is beneficial for maintaining affordability in housing—an aspect many Americans are increasingly concerned about. Despite the upward trend, it is important to keep in mind that price increases may vary regionally, depending on local economic conditions and the availability of homes.

Economic Factors Influencing the Housing Market

Several economic factors are at play that could shape the housing market in the coming years. A booming job market since the onset of the COVID-19 pandemic and high levels of household equity have set a robust foundation for home sales growth. Yun specifically points to the relationship between job growth and the capacity for homeownership, asserting that more jobs generally create more opportunities for individuals to buy homes.

Additionally, Yun mentioned that we're moving closer to the end of the housing inventory shortage—a critical element in the housing equation. As builders increase their output to meet demand, we can anticipate a gradual relief in supply constraints, which may lead to more competitive pricing in the housing market.

The Wealth Gap: Homeowners vs. Renters

One of the more compelling arguments for homeownership highlighted by Yun is the persistent wealth gap between homeowners and renters. As homeowners build equity over time through mortgage payments and property value appreciation, renters often remain stagnant in wealth accumulation. This phenomenon suggests that individuals looking for long-term financial stability would greatly benefit from investing in homeownership, particularly given the projections for rising home values and inventory stabilization.

Yun's remarks bring attention to younger Americans, particularly first-time homebuyers, who now represent a smaller portion of the current home-buying demographic. With more affordable options becoming available and potential interest rate cuts in the offing, there is hope that these individuals will find pathways to enter the market.

Regional Market Trends

While national trends offer a broad overview of the anticipated changes in the housing market, it is essential to recognize that regional variations will also play a significant role in the dynamics of home buying. Different parts of the country may see varying rates of growth, especially in destinations where job growth is particularly robust.

For instance, metropolitan areas experiencing rapid job creation or high levels of investment may witness higher than average increases in home sales and property values. Conversely, regions that have lagged in employment opportunities could struggle to keep pace with the national increases in home sales.

Conclusion

In closing, Housing Market Predictions for 2025 and 2026 reflect a cautiously optimistic outlook, driven by job growth, stabilizing mortgage rates, and an end to the inventory crunch that has troubled many potential buyers. While the market will likely face challenges, the forecasts indicate significant opportunities for home sales growth in the next two years.

The key will be how effectively stakeholders in the housing market, including builders, Realtors®, and policymakers, respond to emerging economic conditions to foster a more supportive environment for both buyers and sellers. For those contemplating their future in homeownership, the upcoming years could indeed present the right moment to dive into the market.