As another historically slow year for the housing market draws to a close, a slew of terms have been thrown around to describe the state of residential real estate.
One descriptor has generated lots of headlines this year: the housing crisis. But is the housing market actually in crisis?
That depends on whether you already own a home, according to Lawrence Yun, chief economist of the National Association of Realtors.
“There is no housing crisis for homeowners,” he said this week during the NAR's virtual economic and real estate summit. He pointed to the fact that homeowners have gained historic levels of equity in recent years. “Absolutely no housing crisis for homeowners…They are doing super well.”
In fact, Federal Reserve data shows that household equity in real estate has been on an upward trajectory since the beginning of 2023, widely considered as the start of the housing market slowdown.
When it comes to affordability for renters looking to move into homeownership, however, crisis might be an appropriate description, Yun said. Most of those prospective buyers don’t have the same built-up wealth as homeowners, so they face greater challenges entering the current housing market.
For example, Yun estimated that in 2024, while homeowners have a median net worth of $415,000, renters only have about $10,000.
“We do have [a] housing crisis in affordability,” he said. “There is a crisis of renters who would like to buy a property.”
Price paradox
It’s a sort of paradox that’s been driven in part by rising prices. Nationwide, home prices are at an all-time high, according to the most recent data from the S&P CoreLogic Case-Shiller Home Price Index. While that has allowed homeowners to build wealth, it’s prohibited renters and other first-time buyers from entering the market.
“This is a very difficult condition,” Yun said.
Other challenges have contributed to the crisis facing prospective buyers, too. For one, the available housing supply, especially supply that is considered affordable, has been depressed, limiting options for buyers, he said.
Also, an upward trend in mortgage rates in recent years has made it even more expensive to buy a house, especially for first-time homebuyers who are more likely to rely on financing their purchase than repeat buyers.
Renters in crisis could see some relief in 2025, according to Yun, who forecasts an increase in home sales and decreases in mortgage rates. Yun also said he expects there to be growth in for-sale inventory next year, a shift that could dampen price growth and create opportunities for buyers.
“Maybe giving a couple of years or more of lighter price growth may be a good thing," he said.