WASHINGTON – Lawrence Yun, chief economist for the National Association of Realtors (NAR), at NAR’s 2024 REALTORS® Legislative Conference(link is external) Housing Economic Issues and Trends Forum(link is external) projected that over the long term, lower interest rates will lead to an increase in existing home sales to 4.46 million in 2024 (a 9% increase from 4.09 million in 2023) and 5.05 million in 2025 (a 13.2% increase over 2024), with further increases in eight of the next 10 years.
Yoon also explained that rents will likely stabilize further, the Consumer Price Index (CPI) will be contained and the Federal Reserve will likely cut interest rates.
Yoon said based on April employment data, there are more than 6 million jobs compared to the pre-COVID peak, and that employment is driving up home prices.
“More jobs mean more home sales and more demand for housing,” Yoon said. “To stimulate the housing market, we need a stronger local economy.”
Yoon discussed the comparison of wealth 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.
“Referral business is key,” Yoon told the crowd of real estate agents. “Past clients have been very happy with the increased equity they’ve seen. Mortgage rates of 7 percent are high compared to a few years ago, but to build equity you still need to buy a home. Have Americans lost the dream of homeownership? I don’t think so.”
Yoon made some comparisons to 1995. The U.S. currently has 40 million more total employees and 70 million more people than it did in 1995. But 2023 saw the worst annual number of existing home sales since 1995. So far in 2024, monthly existing home sales rates have struggled to surpass last year’s levels.
“With so many people living in this country, why are home sales so low?” Yoon asked. “The high mortgage rates and lack of inventory have been shocking. I expect home sales to improve over the next 10 years, probably eight of them.”
“Not all housing demand is being met due to a shortage of supply. We are considering support policies to counter this,” Yoon said, referring to housing inventory.
“Mortgage rates are very important,” Yoon explained. “The Fed delayed their cuts. I thought rates would be lower by now and they would have started to cut. Any cut the Fed doesn’t make this year is just going to be pushed out to 2025. They’re asking for a September cut, but we don’t know what will happen.”
Yoon explained that we are in a high interest rate environment for 30-year mortgages and federal funds rates. He explained that monthly payments for first-time home buyers (10% down payment, 80% of the median home price) have increased significantly during the pandemic, doubling costs.
Yoon noted that homeowners are happy. According to NAR data,2023 Home Buyer and Seller ProfileNine in ten buyers (89%) rely on the services of a real estate agent or broker, and of those, 90% are satisfied and would use that agent again or recommend them to others.
Yoon questioned whether huge government deficits were putting further pressure on interest rates to rise: “Four years into the pandemic, the U.S. is spending as if COVID-19 is still raging,” he said of government spending.
“The economy was strong and unemployment was low, but the budget deficit was huge,” Yoon said. “People have become accustomed to chronically high inflation and will be looking for an inflation hedge, and real estate has a proven track record.”
