What’s Next for the 2025 Housing Market?
NAR Economists Weigh In on Home Sales, Mortgage Rates, and Changing Buyer Demographics
The last two years have been tough for many people working in home sales or those looking to buy or sell, but there’s hope on the horizon. Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), shared a brighter outlook for the housing market in 2025 and 2026 during NAR NXT, The REALTOR® Experience, in Boston.
Yun’s forecast points to higher home sales and moderating mortgage rates, signaling potential recovery.
Home Sales on the Rise
With improving job numbers and recent stock market gains, Yun predicts a notable increase in home sales:
2025: Existing home sales are expected to rise by 9% year-over-year, with new home sales jumping 11%.
2026: Existing-home sales are forecasted to climb 13%, while new home sales increase by 8%.
Pending home sales for September 2024 showed a 3% year-over-year gain. Other positive indicators include growing inventory of both new and existing homes and pent-up demand driven by the U.S. population growth of 70 million since 1995.
Mortgage Rates to Moderate
Mortgage rates have ranged between 6.08% and 7.44% over the past year. Yun anticipates rates stabilizing at the lower end of this range in 2025 and 2026, influenced by the Federal Reserve’s recent rate cuts. However, Yun warns that high budget deficits could prevent mortgage rates from falling significantly.
Home Prices to Increase at a Slower Pace
While homeowners have benefited from record equity gains, affordability remains a concern for buyers. According to NAR research, homeowners have accumulated $147,000 in wealth over the last five years, but this trend may not be sustainable without more supply entering the market.
2025 Median Home Price: $410,700, up 2% from 2024.
2026 Median Home Price: $420,000, up another 2%.
“Bringing more supply to the housing market can keep price increases in line with wage growth,” Yun emphasized.
A Different Type of Buyer Emerges
Jessica Lautz, NAR’s deputy chief economist, highlighted shifting trends among home buyers:
More buyers are skipping the mortgage.
All-cash buyers now account for 26% of home sales, with 31% of repeat buyers paying cash. Rising housing equity has enabled more buyers to forgo mortgage.
Buyers First-time buyers are getting older.
The median age of first-time buyers has reached an all-time high of 38. Many are relying on financial support from family, personal savings, or inheritance to afford higher down payments, which averaged 9% in 2024—the highest in 30 years.
The allure of cities grows.
While suburban moves were popular during the pandemic, city centers are regaining appeal, with the largest uptick in urban home purchases seen in a decade.
Multigenerational Households
Cost savings and caregiving needs have fueled a rise in multigenerational households, now at a record 17% of home sales. Buyers are pooling resources to afford homes and accommodate aging parents or young adults moving back home.
Single women buyers continue to outpace single men buyers.
Single women represent 24% of home purchases, compared to 11% for single men. Declining marriage rates have prompted more individuals to enter the housing market solo.
C.A.R. releases its 2025 California housing market forecast
The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) projects a positive outlook for 2025 as improving interest rates and housing inventory conditions encourage buyers and sellers to return to the market.
Home Sales: Existing single-family home sales are forecasted to increase by 10.5%, reaching 304,400 units.
Median Home Price: California’s median home price is expected to rise by 4.6% to $909,400.
Mortgage Rates: Average 30-year fixed rates are predicted to decline from 6.6% in 2024 to 5.9% in 2025.
While affordability remains a challenge, easing interest rates and improving inventory will create opportunities for buyers and sellers. C.A.R. anticipates a more competitive yet steady market as the housing shortage continues to impact prices.