Mortgage rates will dip to about 6% and home sales will grow about 9% to 13% in 2025, National Association of REALTORS® Chief Economist Lawrence Yun said this week.
Yun shared his predictions Monday during the Chicago Association of REALTORS’® market outlook event at the Radisson Blue Aqua Hotel in Chicago, but his projections came with a caveat.
“Don’t take the numbers too seriously. Just like snowfall. The conditions are there for snow, but … you just have to see. The conditions for sales are there, but you have to see,” Yun said.
Yun noted that a year ago, he predicted a series of Fed rate cuts that would coincide with a drop in mortgage rates. The Fed rate cuts came later in the year than anticipated, and mortgage rates dipped, but not as much as many expected.
Just like a year ago, market data indicates about two or three rate cuts in the coming months, and mortgage rates could hit 6% by the end of 2025, Yun said.
Yun reminded the hundreds of real estate professionals in attendance to reach out to their past buyer clients, whose homes likely have soared in value in recent years. “We have record high housing equity,” he said. “Your past clients are super happy.”
He suspects some of those clients may be ready to dip back into the market as more inventory becomes available. There was a year-over-year uptick in closings during the fourth quarter of 2024 because, even though mortgage rates are roughly the same, more inventory has hit the market.
“As people see more choice, they are beginning to decide and respond to more inventory choices,” Yun said. “But don’t get too excited … we are still in a tight market.”
Yun said the Midwest in particular has seen more demand and price growth than the rest of the country during the last year. That’s due, in part, to buyers seeking affordable options. The red-hot markets in the Northeast, Southeast and Southwest have priced out many would-be first-time buyers.
“Americans are seeking affordability, and therefore the Midwest is beginning to see more traction,” Yun said. “Maybe some people are saying, ‘I’m seeking housing affordability. It is impossible in Boston. It is impossible in L.A., and I will consider the Midwest.’”
One point of concern in the data, Yun said, was the average age of the first-time homebuyer in 2024, which was 38 years old. Before the pandemic, the typical first-time homebuyer was in their late 20s or early 30s. At nearly 40, “that’s not enough time to build housing wealth before they retire,” Yun said.