NAR revises down home sale, mortgage rate forecasts

The National Association of Realtors (NAR) has significantly lowered its housing market forecasts as mortgage rates remain stubbornly high. Chief Economist Lawrence Yun now projects that mortgage rates will hover between 6.5% and 6.7% through 2026, a shift from his previous expectation of a drop to 6%. This revision suggests a slower recovery for the residential mortgage sector, with existing home sales growth expectations reduced from 14% to just 4%.

During NAR's midyear conference, Chief Economist Lawrence Yun adjusted his outlook to reflect a more challenging environment for the residential mortgage market. Yun had previously anticipated that mortgage rates would decline to 6% by 2026, but he now expects rates to remain in the 6.5% to 6.7% range through 2025 and 2026. This adjustment has led to a major downgrade in home sales volume, with the previously forecasted 14% jump in existing home sales being revised down to a 4% increase. Yun noted that while the economy is not in a recession, it lacks spectacular growth, with the "AI boom" currently serving as a primary stabilizer.

The forecast also touched on long-term home price appreciation, with Yun noting the current national median price of $430,000 is on a trajectory to hit $1 million in approximately 25 years. This follows a historical trend where the median price was only $90,000 in 1990. For the mortgage sector, this continued price growth underscores the ongoing affordability challenges facing consumers. Despite these hurdles, NAR Deputy Chief Economist Jessica Lautz highlighted that certain buyer groups remain active, including "HENRYs" (high earners, not rich yet) and Gen Z buyers who are increasingly utilizing government programs to enter the market.

Lautz further identified opportunities for lenders and agents to educate potential borrowers on mortgage products. She pointed out that many first-time buyers mistakenly believe a 20% down payment is mandatory, even though the typical down payment for this group was only 10% last year, and some programs allow for as little as 3%. Additionally, Lautz noted that younger baby boomers are moving to be closer to family rather than downsizing, and single-income or double-income households without children (SINKs and DINKs) are better positioned to save for homes due to the absence of childcare costs. These demographic shifts and educational gaps represent key areas for mortgage professionals to target in a high-rate environment.