Each year, Realtors® who attend the National Association of Realtors® (NAR) conference gain access to cutting-edge real estate insights to better serve their clients. This November, the conference took place in Boston, Massachusetts, and featured NAR’s Chief Economist, Dr. Lawrence Yun, delivering his highly anticipated annual report and market predictions. Dr. Yun oversees a dedicated team that gathers and analyzes data to share with NAR members. Below are some key takeaways and graphs from his presentation this year.
High mortgage rates and low inventory
This year’s hot topics include persistently high mortgage rates compared to a few years ago and the ongoing low inventory. Elevated inflation levels have driven pressure to increase rates, which has discouraged many potential sellers from listing their homes. After all, why trade a 3-4% mortgage for one at 6-7% or higher?
Annual existing home sales decline
As a result of the higher interest rates and inventory remaining low, the annual number of home sales have declined.
Will inventory increase?
Over the past three years, many sellers have opted not to list their homes, primarily due to higher interest rates. However, this pent-up demand is likely to break soon. With improving job numbers and recent gains in the stock market, more Americans may be motivated to act, regardless of interest rates, leading to an increase in inventory. Yun also pointed out that the worst of the housing inventory shortage appears to be coming to an end. With inventory levels rising, both for new and existing homes, it could help to meet the pent-up demand driven by a growing U.S. population.
The other driver of inventory levels is housing starts
To keep up with the growth in new households, the United States needs to build approximately 1.5 million homes annually. However, since 2003 – and particularly during the recession – new home construction has consistently fallen short of this benchmark. As of 2024, the U.S. faces a shortage of 6 to 7 million homes, a key factor behind the nationwide housing shortage. The graph below highlights how housing starts since the recession have remained well below the necessary 1.5 million per year.
Mortgage rates to fall?
Lawrence anticipates that interest rates will remain in the 6% to 7% range in 2025. Rent growth is expected to slow, which will help moderate the Consumer Price Index (CPI). This, in turn, could prompt the Federal Reserve to gradually lower the Federal Funds Rate. Historically, average mortgage rates were around 8% in 2000, declining steadily to a historic low of 3.35% in 2012. In January 2019, rates started at 4.46% and dropped to 3.8% by November. Fast forward to 2024, and rates have risen to around 7%, driven by inflation, the federal deficit, and yields on 10-year Treasury bonds. The graph below illustrates the correlation between mortgage rates and the 10-year Treasury yield.
Will prices fall?
Dr. Yun notes that the question he hears most often is, “Will home prices fall?” His response highlights the stark differences between today’s market and the last boom-and-bust cycle. In 2004, there was a massive oversupply of new homes. In 2024, we face a significant undersupply of both new and existing homes, which should continue to uphold home values, he explains.
Is it still better to own a home, rather than rent?
A graph, shared by Dr. Yun, showed homeowner wealth compared to renter wealth. It clearly showed, yes, it is still better to own a home.
Always remember, real estate is local – even down to the street level. National statistics provide broad trends but may not reflect the specifics of your area. For the most accurate and up-to-date information about your neighborhood, consult your local Realtor.
Duane graduated with a business degree and a major in real estate from the University of Colorado in 1978. He has been a Realtor® in Boulder since that time. He joined RE/MAX of Boulder in 1982 and has facilitated over 2,500 transactions over his career. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail duaneduggan@boulderco.com,
call 303.441.5611 or BoulderPropertyNetwork.comboulderco.com.