Home prices could rise 2% in 2025 and another 2% in 2026, according to the latest forecast from the National Association of Realtors.
The group’s economist, Lawrence Yun, predicted that the median price of a U.S. home would continue to rise in 2025, but at a slower pace than in previous years, with the median existing home price reaching $410,700. The average home price in November was $406,100.
Researcher Yoon said, “The rate of increase in housing prices may slow further and become more gradual.” “Maybe that’s a healthy thing. We want incomes to keep up with house prices. Maybe a few more years of lower price increases might be a good thing.”
Governor Yoon said at the annual summit that he expects the Fed to maintain its gradual approach to monetary policy easing in 2025.
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“While concerns about the federal deficit and rising public debt may limit the scope for rate cuts, borrowing costs are expected to remain broadly stable, providing some relief to potential buyers,” the forecast said.
NAR predicts that mortgage rates will stabilize near 6% by 2025, making this the ‘new normal.’
At this rate, more buyers are expected to return to the market and boost activity, with the association predicting 4.5 million existing home sales in 2025. The annual pace of sales in November was 4.15 million units.
Despite the ongoing national housing shortage, Prime Minister Yoon said inventory levels are gradually improving and are poised to increase further next year.
“This upward trend is expected to be driven by a combination of new construction projects and homeowners deciding to list their properties, encouraged by stabilizing mortgage rates and improving market conditions,” according to the group. “NAR expects this to lead to increased construction, with housing starts expected to reach 1.45 million units in the next few years, just below the historical average annual level of 1.5 million units.”
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Then more people will be able to buy a home.
“Homebuyers will have more success next year,” Yoon said. “The worst of our affordability problems is over, with more inventory, stable mortgage rates, and continued job and income growth paving the way for more Americans to achieve homeownership.”
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