Six months ago, Lawrence Yun, chief economist of the National Association of Realtors, stood at the front of a crowded ballroom in the Boston Convention Center and said he saw a light at the end of the tunnel for the floundering housing market.
On Tuesday, in a similarly crowded ballroom in Washington, D.C., Yun said that light has “flickered out.”
“I thought that at this conference, I would share some good news with you: Home sales [are] rising, momentum is building,” he said during a presentation at the trade group’s annual legislative conference. “But we are not seeing that … the recovery has been delayed.”
Indeed, the latest data from the NAR showed that existing home sales were at a 16-year low in April. Contracts to sell existing single-family homes and condos also declined in April. At the same time, mortgage rates have remained stubbornly high, hovering around the 7% threshold rather than easing to the 6.5% range many industry insiders, including Yun, had forecast at the end of last year.
Where does the market stand, and where are things heading next? It's complicated, according to Yun.
The Fed could indirectly provide mortgage relief
Since the start of this year, the central bank has signaled that it is changing its strategy, taking a wait-and-see approach rather than the rate-cutting campaign many economists expected.
That hesitancy to lower interest rates has been intensified by the White House’s ever-changing tariff policy, Yun said, and that’s upset the bond market, in turn creating a challenging mortgage environment.
"The mortgage rate is the magic bullet, and we are just waiting and waiting as to when that could come down," he said.
Though the Federal Reserve isn’t directly tied to the mortgage market, Yun argued that the bank’s next interest rate cut could have “a meaningful impact on mortgage rates," noting that some economic data is pointing to easing inflation in the market right now.
“When the Fed [cuts rates], they will be doing so because inflation is fully under control, which means the bond market should be behaving much better,” he added, “and mortgage rates can go down along with the Federal Reserve rate.”
Even as high mortgage rates are crippling prospective homebuyers, though, Yun noted that there’s been a steady increase in mortgage applications, a sign that buyers might be ready to reenter the market when rates come down.
"Housing demand appears to be there, but just not getting realized at the moment," he said.
'Builders are in a different market'
Much of the crowd at Tuesday’s presentation consisted of real estate agents. Yun explained that while his audience was likely feeling the lack of recovery, another corner of the market, however, is more guarded.
“The builders are in a different market compared to the Realtors,” he said. “The reasoning for builder sales being so high is they’re offering incentives at lower prices.”
More than that, Yun said buyers seem more responsive to incentives from builders that lower monthly payments than they are to incentives from real estate agents that lower the overall price of a home. For example, builders can offer mortgage rate buydowns, giving buyers lower payments each month. Real estate agents can mimic that by dropping the price on an existing home, but it doesn’t have the same effect.
That said, homebuilders are starting to feel the effects of economic uncertainty, too. Data shows fewer homes are being built and builder confidence is dipping. Homebuilders have said they’ll continue offering incentives and try to keep prices low, but they’ve also acknowledged that tariffs could lead to higher consumer prices.
Yun forecasts more home sales, lower mortgage rates
Despite the turbulence, Yun said he’s hopeful for a busier second half of the year, and he’s sticking with his 2025 housing market predictions.
That forecast would see existing-home sales rise 6% and new home sales increase 10% in 2025 compared to 2024.
At the same time, the average 30-year, fixed-rate mortgage would settle around 6.4% by the end of the year.
For that to manifest, Yun said, it’s crucial that job gains continue and the government passes a tax package that can right the national spending deficit, especially because there seems to be pent-up demand from homebuyers.
“Desire and aspiration is there,” he said of homeownership, “but the possibility has become difficult.”