A new forecast suggests home prices may rise gradually over the next two years, giving incomes a chance to catch up.
Key Facts:
– The National Association of Realtors (NAR) projects a 2% increase in 2025 and another 2% in 2026.
– Economist Lawrence Yun expects the median U.S. home price to reach $410,700, up from November’s $406,100.
– Mortgage rates are predicted to stabilize near 6%, which NAR considers a “new normal.”
– Existing-home sales could rise to 4.5 million in 2025, up from the current pace of 4.15 million units.
– Inventory is set to improve, with housing starts forecast to hit 1.45 million units in the next few years.
The Rest of The Story:
NAR’s latest outlook points to a slower pace of appreciation, which could allow buyers to catch a break after years of steep increases.
Lawrence Yun, the association’s chief economist, believes more modest price growth might actually help wages keep pace with housing costs.
Federal Reserve policy is also expected to ease cautiously in 2025, though concerns about public debt may keep rate cuts limited.
Even so, borrowing costs are expected to steady around 6%.
This stability, along with an improving inventory, may encourage more homeowners to list and more builders to break ground.
Texas has welcomed millions, while California sees a mass exodus.
Housing prices in CA have soared twice as fast as in TX, despite TX adding 2x more new homes since 2000!
The culprit? Restrictive urban land planning! pic.twitter.com/imkm3A5UIO
— Stephen Moore (@StephenMoore) December 10, 2024
Commentary:
A modest uptick in home prices could be a healthy sign.
When property costs are not racing upward, families have a chance to build up their income and savings at a similar rate.
That helps new buyers enter the market without feeling priced out.
As interest rates settle and consumer confidence grows—partly due to policies from the incoming Trump administration—more people are likely to feel comfortable making a move.
Over time, these conditions could bring more balance to the market and spur a steady recovery in home sales.
The Bottom Line:
Home prices look set to climb at a moderate pace, which could create better alignment between wages and housing costs.
READ NEXT: Two Men Dead After Searching For Sasquatch in a National Forest
NAR’s forecast suggests a market where both buyers and sellers can find common ground.