In a climate where the U.S. housing market has been struggling due to rising mortgage rates since 2022, industry experts are cautiously optimistic about future growth. Lawrence Yun, the chief economist for the National Association of Realtors (NAR), has forecasted significant increases in home sales beginning in 2025. Yun shared these projections during the NAR NXT conference held in Boston. He anticipates a 9% rise in home sales in 2025, followed by a 13% increase in 2026.
Yun attributes these optimistic projections to expected broader macroeconomic trends that could revitalize the housing market. He emphasized the link between employment and homeownership, stating, “When more people work, they have the capacity or they’re in a better position to buy a home.”
This positive outlook comes in contrast to a more cautious economic forecast from the Mortgage Bankers Association (MBA). The association’s macroeconomic forecast sees a slowdown in economic growth over the next few years. While the U.S. gross domestic product (GDP) grew by 3.2% in 2023, the MBA expects GDP growth to moderate to 2.3% in 2024 and remain at or below 2% through 2027. Residential investment, which surged in the initial years following the COVID-19 pandemic, is projected by MBA to grow unevenly, registering a minor uptick of 0.1% in 2024, with future growth predictions ranging between 1.1% and 3.3% in the following three years.
Yun also addressed the potential for mortgage rate cuts, predicting four rate cuts in 2025. However, he noted that the economic landscape could change significantly with new policies from President-elect Donald Trump. Trump’s approach to economic policy has included criticism of Federal Reserve Chair Jerome Powell’s interest rate decisions, along with proposals for tariffs that many economists argue could exacerbate inflation.
Trump has floated the idea of implementing sweeping tariffs, including a 10% to 20% tariff on all foreign imports and a hefty 60% to 100% tariff on Chinese goods. He has also suggested a 25% tariff on Mexican imports. Such measures could inflate costs for consumers and industries alike, potentially making homeownership more challenging by squeezing household budgets and increasing homebuilding expenses.
In discussing Trump’s potential impact on the housing market, Yun expressed concern about the implications of the federal budget deficit, pointing out, “Today, we have a massive budget deficit at a time when we are not in an economic recession.” He cautioned that any expansion of tax cuts could add to the deficit and reduce the availability of mortgage funds, unless the Trump administration introduces a compelling plan to curb the deficit, which might help lower mortgage rates.
The interplay between these economic factors underscores the uncertainty facing the U.S. housing market, as it prepares to navigate the complex terrain shaped by fiscal policies, economic growth projections, and potential changes in monetary policy.
Source: Noah Wire Services