During a virtual Real Estate Forecast summit hosted by the National Association of Realtors® (NAR) July 16, NAR Chief Economist Dr. Lawrence Yun emphasized the financial success of real estate investments and the current state of mortgage debt and real estate net worth. He also discussed the impact of interest rates on housing demand, job growth and potential market recovery scenarios.
The event also focused on market trends and original data tracked by economists, providing insights for agents to aid clients in making data-driven decisions. NAR Deputy Chief Economist Jessica Lautz addressed challenges faced by first-time homebuyers and the dominance of all-cash buyers, offering strategies to navigate misinformation in the market, while NAR Research Analyst Anat Nusinovich presented trends in migration affecting housing markets, noting shifts in population growth and domestic migration patterns.
Yun’s main points included:
- Mortgage debt is at a record high, but real estate asset values are also at record highs, resulting in record high real estate net worth for homeowners.
- Foreclosure rates are at record lows, and 35 million homeowners have no mortgage, indicating the housing market is on solid ground.
- The Federal Reserve is expected to cut interest rates two to three times this year, which should help improve housing affordability and demand.
- Potential housing demand is high, with many buyers waiting for rates to come down before entering the market.
“Using a 6% mortgage rate for next year, I anticipate home sales to rise by 14%,” he said. “Also, the assumption is we’re not going to face a recession despite all this discussion of the negative impact of tariffs.”
Yun said he expects the Fed to cut rates two to three times in the next 12—18 months, which could bring mortgage rates down to 6%. This could spur an additional 550,000 home sales over the next 12—18 months as more buyers qualify.
Nusinovich presented trends in migration affecting housing markets, noting shifts in population growth and domestic migration patterns. She pointed out that the U.S. population grew by nearly 1% in the last year, the fastest growth since 2001. Areas like Dallas; Ocala, Florida; Des Moines, Iowa; and Indianapolis, Indiana are seeing strong job growth and housing demand due to domestic migration. Also, continued job growth and lower mortgage rates are driving increased demand for home purchases in many markets.
“During the pandemic years, we saw a lot of Americans relocating to the South, with its rising popularity,” she said. “With our expectation for additional rate cuts by the Federal Reserve, we expect this trend in more areas of the country, and not only in the South. Continuous job additions combined with mortgage rates below 7% have really contributed to the rising demand for home purchase loans in many areas.”
Lautz addressed the challenges faced by first-time homebuyers and the dominance of all-cash buyers, offering strategies to navigate misinformation in the market. Her main points included that 1) first-time homebuyers made up only 24% of the market last year, down from a historical norm around 40%, and 2) many repeat buyers, especially older baby boomers, are purchasing homes with all-cash, including 10% of first-time buyers.
“When we think about the housing market today, we know the winners are homeowners; they’re gaining housing equity, they’re able to make housing trades pretty freely right now if they’re not stuck into that lock-in effect or really thinking about that lock-in effect,” she said. “But then we have on the other side our first-time buyers. They’re struggling to get into the market, and what we continue to record on a monthly basis is really their struggle. When we look at first-time buyers, we know the annual share plummeted to the lowest amount that we’ve ever recorded.
“Rising rents are another factor impacting buyers, especially a couple of years ago, even though they have come down a little bit. Student loan debt and childcare costs are also really big hurdles for buyers trying to get into the market.”
Lautz also explained that specific seasonal buying can aid first-timers.
“The fall and winter are better for them because they’re not competing against families,” she said. “They have a little more to work with when they think about the competition in the market. They’re usually in a little better spot.”
