Real Estate Market Set to Rebound in 2025: NAR Economist Sees Brighter Days Ahead

Pompano Beach Real Estate market expected to rebound in 2025 and 2026

At the recent Residential Economic Issues & Trends Forum during the 2025 REALTORS® Legislative Meetings, National Association of Realtors® Chief Economist Lawrence Yun shared an optimistic outlook for the U.S. housing market, projecting a moderate but steady recovery over the next two years.

Home Sales Expected to Rebound in 2025 and 2026

Despite current market challenges, Yun anticipates a turnaround starting in 2025. He forecasts that existing home sales will grow by 6% in 2025 and accelerate further by 11% in 2026. New-home sales are also expected to rise—by 10% next year and another 5% the year after. Meanwhile, the median home price is projected to increase by 3% in 2025 and 4% in 2026.

However, Yun noted that elevated mortgage rates continue to act as a drag on homebuying activity. He expects rates to average around 6.4% in the second half of 2025 and ease slightly to 6.1% in 2026.

Mortgage Rates: The Key to Market Recovery

“The housing market is still struggling,” Yun told attendees. “A big reason for the slow rebound is the Federal Reserve’s cautious stance—it appears they’re holding off on rate cuts for longer than expected.”

This cautious monetary policy shift followed a revised economic forecast by the Fed in March 2025. The central bank lowered its projection for GDP growth from 2.1% to 1.7%, while also increasing its inflation outlook from 2.4% to 2.7%.

“The sharp rise in mortgage rates has taken a toll,” Yun explained. “Existing homeowners are content, but first-time buyers are facing much steeper monthly costs—that’s what’s holding the market back. We need mortgage rates to drop for momentum to return.”

Inflation and Housing Costs

Yun emphasized that inflation, especially in housing, remains a key factor influencing the Fed’s decisions. While April’s inflation rate came in at 2.3%, close to the Fed’s 2% target, Yun pointed out that shelter costs—the largest component of consumer prices—are beginning to decline, signaling possible relief ahead.

“There’s a lot of focus on tariffs, but less attention is paid to how shelter costs impact inflation. Thankfully, shelter prices are cooling off from their peak,” he noted.

Positive Signs Amid Challenges

Despite two years of historically low home sales—levels not seen in over three decades—there are signs of hope. Yun highlighted a recent uptick in mortgage applications as an encouraging indicator of renewed buyer interest.

In addition, strong employment figures and wage growth are supporting consumer confidence. “Wages are growing at 3.8%, which is outpacing inflation at 2.3%. That’s a good sign,” Yun said.

Encouragingly, Yun also mentioned that a significant number of renters are expressing interest in becoming homeowners, which could help boost demand once market conditions improve.

Looking Ahead

While challenges remain, especially in the form of high borrowing costs, Yun’s forecast offers a cautiously optimistic view for the housing industry. With inflation cooling and mortgage rates potentially easing in the near future, both buyers and sellers may soon find more favorable conditions.

To explore Yun’s full analysis, visit the 2025 Real Estate outlook

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