Boston, MA—Addressing an audience of hundreds on yet another big stage last week, Dr. Lawrence Yun, chief economist for the National Association of REALTORS® (NAR), acknowledged that the broad-based real estate rally that he and many other economists have been predicting has not—and will not—happen this year.
“As you know, 2024 has been a very difficult year on many fronts, even in your pocketbooks,” he said. “According to the statistics, we did not get the home sales recovery this year after an awful 2023.”
With 2024 now almost certain to see a lower rate of home sales than the already historically sluggish pace seen in 2023, Yun and other economists who expected at least a modest bounceback this year are having to face the reality that markets have not behaved as they expected.
“The forecast is just like trying to forecast how many inches of rain or snow—I’m going to be wrong,” Yun said.
But despite the misses, and noted absence of a full recovery to pre-pandemic sales, Yun and NAR Vice President of Research Jessica Lautz kept a dogged focus on the positives, predicting again that 2025 will see a significant 9% increase in existing-home sales while acknowledging even more uncertainty around the new presidential administration.
“Your clients, some may be (saying), ‘Oh, I remember President Trump’s 4% mortgage rates.’ You have to explain why it is not likely to happen,” Yun said.
A ballooning deficit, still-limited inventory and incredibly challenging conditions for first-time and moderate-income buyers are still stymying the market. In particular, NAR’s most recent surveys found an all-time low in first-time buyers, as the income needed to purchase a median home grew to just under $100,000—almost 20% higher than the median household income.
Yun predicted a slowdown of home price gains, but a “new normal” of 6% mortgage rates, neither of which will do much to alleviate these affordability issues. President-elect Donald Trump has threatened to exert more direct control over the historically independent Federal Reserve, though Yun noted Trump does not have the power to “fire” Federal Reserve Chair Jerome Powell, and does not control interest rates.
The higher mortgage rates are closely linked to U.S. debt, which is now about $35 trillion. Although every presidential administration since Bill Clinton has added to the deficit, Trump oversaw an additional $7.8 trillion, driven by both pandemic spending and massive tax cuts.
Trump is extremely unlikely to let those tax cuts expire early next year, Yun said.
“The only (other) way to address (the) deficit situation in the future may be to bring the government spending down, but we’ll see how it goes,” he said.
Lautz focused more on the consumer side, and specifically that element of unaffordability which has locked so many buyers out of the market.
“The select few first-time homebuyers who can enter into the market are wealthy, they’re richer. They have more money to be able to do so. This is an elite first-time homebuyer this year,” she said.
Both Lautz and Yun, though, urged agents to remember that those who did get into the market are almost all doing very well, with historic levels of housing equity. Those sellers—who are also buyers—have a lot of power in the market, Lautz noted.
First-time buyers who are not wealthy are evolving, Lautz noted, and are now motivated by different factors. They are older, less likely to have children and much more likely to be part of a multi-generational household.
Something else Lautz noted as a “lighter” tangent in her address was that people are increasingly making housing decisions based on their pets, looking for neighborhoods or amenities to accommodate “fur babies.”
“Y’all know it’s a $147 billion business in the U.S.? That private jets have amenity kits for pets, so their fur doesn’t get dry or something?” she asked. “People are willing to spend money on their pets. We continue to see this in the data.”
But politics clearly was the dominant theme, with the address happening only days after Trump’s reelection. As Yun took questions from the audience at the end of his address, agents and brokers were clearly trying to parse out what the new administration might mean for their businesses.
One audience member asked about Trump’s plan for massive tariffs on goods being imported into the country, with Yun acknowledging what nearly every other economist has—that these policies would drive prices up.
“As American production capacity begins to increase, then there will be less inflationary pressure and of course more domestic production, which is the goal of the tariff. But…it takes time to build factories,” he said.
Another question came from an audience member worried about insurance costs, which are mostly regulated at the state level. Yun said there was no sign of any significant relief as that crisis continues to grow.
“The insurance companies are running out of cash and, therefore, the only thing they can do is raise premiums on what they think is the right business model,” he said. “So at the moment, it looks like the high insurance costs will continue to increase.”
Although not directly focused on current political developments, Yun also took a moment near the end of his address to talk about another current event—the Nobel Prize in Literature being awarded to Korean writer Han Kang.
Kang, according to Yun, grew up in the same town he did in South Korea. That area is considered “uncultured” and is essentially a “redneck” area of the country, he said, and Kang’s writings are influenced by pro-democracy protests against an authoritarian government taking place there in the 1980s, which ended up with a thousand protestors shot.
Yun said the theme of all this, and of Kang’s writing, is the human capacity for both good and evil, and posited that those protestors, coming from “simple” backgrounds, were inspired by American democracy.
“From there, (Kang) won the Nobel Prize in literature, which is to say, don’t ever look down on people living in the inner city of Baltimore, people living in the Appalachian Mountains or people living in Puerto Rico. They may surprise you,” Yun said.
