Demand is lurking, according to NAR Chief Economist Lawrence Yun, but one persistent roadblock is keeping potential homebuyers waiting in the wings.
WASHINGTON, D.C. — The National Association of Realtors’ chief economist believes there’s one ingredient that is holding back home sales this year — and it may be one of the toughest to nail down.
During a June 3 economic forum at NAR’s mid-year legislative meetings, Lawrence Yun said he’s seeing signs that buyer demand is ongoing, home price growth is moderating and wage growth is outpacing inflation. However, 30-year mortgage rates continue to hover around 7% — and that is hurting the market.
“The mortgage rate is the magic bullet, and we are just waiting and waiting as to when that could come down,” Yun said.
Inflation and government debt aren’t helping: So far this year, the Federal Reserve has declined to cut interest rates, and Fed Chair Jerome Powell said just last month that he “couldn’t confidently say” whether any cuts will happen in 2025.
While uncertainty about tariffs is keeping the Fed cautious, Yun said there are plenty of other factors that could convince the government to resume cutting interest rates. For example, inflation — especially on shelter and energy — is softening. If other countries wind up lowering their rates through new agreements with the U.S. amid the current tariff war, that could also help cool inflation.
Government debt poses another problem. Yun said spending needs to be reined in soon. “We have to make this decision,” he explained, “otherwise in 10 years Social Security checks will be cut by 20%. Money is running out.”
Whenever the Fed does decide to cut rates, Yun believes that move will be significant. Based on past models, he predicts there will be six cuts spanning 12-18 months.
Fears of a recession add strain: Many Americans are worried about the possibility of a recession amid ongoing economic concerns. This unease further dampens home sales, according to Realtor.com Chief Economist Danielle Hale.
Meanwhile, sellers who are pricing high don’t appear to have caught on to the market slowdown. Many have made price cuts — and that’s something Hale suggested agents need to explain to clients in the coming months.
“I think they are overreaching a bit,” Hale said of home sellers.
While it’s a different story from region to region, with the Midwest and Northeast markets strong for sellers as inventory remains tight, there’s still a national housing shortage that will take years to fix.
“This is not a problem we’re going to solve overnight, but it is an important problem if we want to continue to make homeownership available — especially for younger generations,” Hale said.
