Home Sales Expected To Rise In 2025 & 2026
The housing market seems ready for a turnaround. Lawrence Yun, Chief Economist for the National Association of Realtors® (NAR), forecasts significant growth in home sales over the next two years. Stabilized mortgage rates and steady employment gains are paving the way for recovery.
What Changed After A Tough 2024?
2024 was a difficult year for the housing market. Home sales remained sluggish, following a lackluster 2023. However, September 2024 showed signs of improvement, with pending home sales increasing. This momentum is expected to build into 2025 and 2026.
Key projections for the upcoming years include:
- 2025 Home Sales: Anticipated 9% growth.
- 2026 Home Sales: Expected 13% increase.
Factors driving the recovery:
- Mortgage Rates: Forecasted to stabilize between 5.5% and 6.5%.
- Employment Growth: Record-high payroll numbers are expanding the pool of potential buyers.
The housing market is poised for steady growth, bringing renewed confidence to buyers and sellers.
Also Read: Why Townhomes Are Becoming The New Normal In U.S. Housing
Homeownership’s Impact On Wealth
Owning a home isn’t just about having a place to live. It’s a significant financial asset. Homeowners in 2024 had a median net worth of $415,000, compared to only $10,000 for renters.
Key benefits of homeownership:
- Wealth Accumulation: Building equity increases long-term financial stability.
- Real Estate Appreciation: Home values often rise over time, offering additional gains.
Early market entry can set the foundation for lasting financial benefits.
Mortgage Rates Stabilizing
Mortgage rates have been a hot topic, and they’re not returning to pre-pandemic lows. Yun predicts rates will hover around 6%, becoming the new standard.
Influencing factors:
- Federal Reserve Rate Cuts: Four rounds are expected in 2025, beginning as early as January.
- Market Stabilization: Predictability at 5.5% to 6.5% will help buyers plan better.
While these rates are higher than historical lows, their stability offers reassurance to the market.
Also Read: Greater Phoenix Real Estate Update Heading Into The Holidays
Addressing Housing Supply Challenges
Limited housing inventory remains a significant hurdle. Without enough homes on the market, prices stay high, affecting affordability.
Steps needed to address the issue:
- Increased Construction: More housing will ease pressure on prices.
- First-Time Buyer Support: Efforts should focus on making homeownership accessible.
Balancing supply and demand is critical for sustained market health.
Government Budget Deficit & Mortgage Availability
The government’s budget deficit plays a role in housing. High borrowing impacts mortgage availability and interest rates.
Key concerns:
- Deficit Solutions: Addressing the deficit could lower borrowing costs.
- Rate Reductions: Further rate cuts depend on credible financial plans.
Without action, the deficit could limit market flexibility, slowing progress.
Projections For 2025 & 2026
Yun’s forecasts provide a roadmap for the next two years:
- Existing-Home Sales: 10% rise in 2025; 13% in 2026.
- New Home Sales: Growth of 11% in 2025; 8% in 2026.
- Median Prices: Steady increases of 2% annually.
These numbers indicate a measured but positive trajectory.
Also Read: The Top 5 Signs A Buyer Isn’t Serious About Buying Your Home
Factors To Watch
Several trends will shape the housing market’s future:
- Federal Rate Cuts: Early action in 2025 could influence affordability.
- Employment Growth: Strong job numbers will support demand.
- Housing Policy: Initiatives to increase inventory will ease pricing pressures.
Monitoring these developments will provide insight into the market’s direction.
Final Thoughts
The housing market is set to rebound after a challenging period. Stabilized mortgage rates, job growth, and gradual inventory improvements are laying the groundwork for increased activity. Buyers and sellers alike have reason for optimism in the coming years.
Also Read: Here’s Why The Arizona Housing Market Isn’t Crashing In 2024