Home Sales Expected To Rise 6% in 2025 Despite Persistent Headwinds

Despite persistent headwinds, existing home sales are set to increase by 6% this year and 11% next year, while new home sales are expected to increase by 10% in 2025 and 5% next year, according to National Association of Realtors chief economist Lawrence Yun.

The housing market remains very difficult, Yun told an audience at a forum addressing residential economic issues and trends at the REALTORS Legislative Meetings in Washington, D.C. For the past two years, sector sales have remained at 30-year lows.

The troubling trend can be attributed in part to high mortgage rates, according to Yun. New buyers face higher monthly payments, which he said is “killing the housing market.”

“Mortgage rates are the magic bullet, and we’re waiting and waiting until those come down,” Yun said. He predicted mortgage rates will average 6.4% over the remainder of 2025 and fall to 6.1% next year.

“Part of the delay in recovery is because the Federal Reserve has changed its outlook and appears to be on pause for a longer period,” he added.

In March, the Federal Reserve reduced its forecast for gross domestic product growth to 1.7%, down from the 2.1% it predicted last year. It also indicated it expects inflation to rise to 2.7% rather than 2.4%. Inflation was 2.3% in April, slightly higher than the Fed’s 2% target. Once inflation is under control, the central bank is likely to cut interest rates, according to Yun.

Shelter cost is a major force impacting inflation, but headlines have focused more on the impact of tariffs, said Yun. Luckily, shelter cost is trending down from its recent cyclical peak, he said. In addition, job growth has exceeded pre-pandemic highs, and wage growth of 3.8% is outpacing the consumer price index of 2.3%.

“There’s a light at the end of the tunnel based on recent rises in mortgage applications to buy a home,” Yun said. “Moreover, a solid majority of renters expressed a desire to own a home.”

The median home price will climb by 3% this year and 4% next year, the housing expert predicted.