Where is the Real Estate Market Heading?
The Chief Economist for the National Association of Realtors (NAR), Lawerence Yun, sees home sales rising nine percent in 2024 and rising 13.2 percent 2025. Yun also forecasts home sales rising in eight of the next ten years. He thinks mortgage rates will fall in the long term because rents will calm which will hold down the consumer price index (CPI) which in turn will encourage the Federal Reserve (the Fed) to cut interest rates. Yun said that based on April’s employment data, there are six million more jobs compared to the pre-Covid highs, and those added jobs are boosting home prices. More jobs mean more home sales and higher housing demand.”
Yun added that to build wealth, buying a home has historically been a key ingredient. At the 2024 NAR Legislative Meetings he emphasized the importance of the current lack of inventory which will contribute to rising home prices. He also spoke to the high mortgage rates facing Americans, “Mortgage rates are very important,” explained Yun. “The Federal Reserve has delayed rate cuts. I would have thought that, by now, rates would be lower and rate cuts would have begun. Whatever rate cut the Federal Reserve does not do this year will simply be pushed back to 2025. They’re calling for a September rate cut, but we’ll see.” Yun also stressed the “massive budget deficit while experiencing a good economy, will result in low unemployment. People may get used to permanently high inflation, and people will be looking for an inflation hedge. Real estate is a proven [hedge against inflation].”
Forbes states that Fannie Mae also forecasts an increase in home sales this year, as well. Comerica, the financial services firm and bank, forecasts a rise in home prices of 2.9% in 2024 according to Bill Adams, the firm’s chief economist.
And the S&P Case-Shiller Index reported home price growth increased in February by 6.4%. That’s up from 6% in January.
The Mortgage Bankers Association predicts home prices could rise 4.1% this year.
The NAR is a bit more conservative, predicting an increase of about 2%.
As alluded to earlier, so much depends on mortgage rates. Those mortgage rates will be heavily influenced by what the Fed does in its fight against inflation.