Last week, the National Association of REALTORS® (NAR) hosted its year-end Real Estate Forecast Summit, featuring Chief Economist Lawrence Yun and other distinguished experts.
The event provided a comprehensive outlook on the housing market, key economic trends, and regional variations shaping the real estate landscape in 2025. You can view the entire video replay by clicking here.
The State of Homeownership and Wealth Accumulation
Homeowners have experienced substantial wealth growth, with household equity adding approximately $5 trillion since the onset of COVID-19. This equates to an average gain of tens of thousands of dollars in home equity for individual households, depending on location and property value. This remarkable growth highlights the power of homeownership as a wealth-building tool.
Federal Reserve data further emphasized the wealth gap between homeowners and renters. For example, in 2024, the median net worth of homeowners was projected to exceed $400,000, compared to renters, whose median net worth remained below $10,000. Dr. Yun says his disparity underscores the importance of early homeownership in building financial security and long-term stability.
From my perspective, while the findings show that homeowners have higher wealth, it does not mean that homeownership created all the wealth difference. It could be as simple as households with more resources are more likely to afford or purchase a home.
Affordability Crisis
While existing homeowners thrive, aspiring first-time buyers face significant hurdles. The median age of first-time homebuyers has climbed to 38, a stark increase from historical norms. In the 1980s and 1990s, the median age was closer to 30, reflecting the relative affordability of homes during those decades.
Today’s affordability crisis, driven by high home prices and elevated mortgage rates, has delayed the dream of homeownership for younger generations. This trend reduces the years available for building home equity and impacts broader economic mobility.
Economic Outlook and Housing Market Projections
Dr. Yun forecasted a modest but encouraging recovery for the housing market in 2025, with key projections including:
Existing-home sales: Expected to rise by 7-12%.
New home sales: Anticipated growth of 11%.
Median home prices: Projected to increase by a manageable 2%, allowing incomes to catch up.
Mortgage rates: Expected to stabilize near 6%.
While Dr. Yun’s projections were optimistic, other economists at the summit presented more conservative growth estimates. This divergence could reflect NAR’s position as an advocate for real estate professionals. The contrasting views added valuable balance to the discussion, enabling attendees to form a well-rounded outlook for 2025.
Job growth and new construction are expected to be the primary drivers of market recovery, as builders ramp up activity to address inventory shortages.
Regional Hot Spots
The summit highlighted several markets poised for strong growth in 2025, including:
Boston, MA
Charlotte, NC
Grand Rapids, MI
Greenville, SC
Indianapolis, IN
Kansas City, MO
Phoenix, AZ
San Antonio, TX
These regions stand out due to favorable job growth, positive migration trends, and increased home inventory.
National Debt and Its Impact on Mortgage Rates
Dr. Yun addressed the role of national debt in shaping mortgage rates. Despite anticipated Federal Reserve rate cuts, the U.S.’s $35 trillion debt will likely keep mortgage rates at a new normal of 6%, above the pre-COVID average of 4-5%. This structural shift underscores the need for financial planners to help clients prepare for higher borrowing costs in the years ahead.
Key Takeaways
Affordability Solutions: Guide younger clients on saving strategies and leveraging first-time buyer programs to enter the housing market.
Economic Trends: Stay informed about interest rate movements and job growth to provide timely advice on real estate investments.
Regional Opportunities: Explore high-growth markets for clients seeking portfolio diversification or relocation opportunities.
Market Readiness: Help clients navigate the timing of purchases and sales, particularly in a recovering market.
Looking Ahead
The 2024 summit offered a cautiously optimistic outlook for the housing market, suggesting stabilization after two challenging years. For financial planners, the insights shared at the event serve as a valuable resource for helping clients navigate the dynamic real estate landscape. By staying informed and proactive, we can empower our clients to make sound decisions that align with their financial goals.
About the author/planner/teacher
As the Founder and CEO of The Real Estate Whisperer™ Financial Planning, Rich Arzaga, CFP®, CCIM, is a flat-fee financial advisor who provides advice only. By focusing solely on delivering client-centered financial advice rather than managing investments, he ensures his undivided attention to his clients' needs.
Drawing on his extensive expertise, Rich provides valuable advice on various real estate topics, including buy-sell-hold strategies, tax-deferred and highly appreciated tax reduction strategies, real estate succession planning, and rental property cash flow analysis.
His exceptional knowledge and real estate strategies have earned him recognition in business and finance publications such as the Wall Street Journal, The New York Times, Newsweek, Kiplinger, and The Journal of Financial Planning. As an esteemed adjunct professor at UC Berkeley Personal Financial Planning programs, Rich has been Honored for his excellence in teaching.
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