The housing market did not perform well in 2024 but the prospects for 2025 may be better, depending on employment and mortgage rate levels, according to Lawrence Yun, chief economist of the National Association of Realtors (NAR).

“2024 has been a very difficult year on many fronts,” Yun said, speaking during a NAR forum in Boston. “We did not get the home sales recovery this year after an awful 2023.”

This happened even though the U.S. enjoyed record-high payroll employment as of September 2024 —one of the two factors, besides mortgage rates – that influence home sales.

Yun predicted that mortgage rates will hover between 5.5% to 6.5% under the new Trump administration -- well above the 4% level in the first Trump presidency. He noted that the country is suffering from a massive budget deficit while Trump is expected to extend or expand tax cuts.

Yun predicted there will be six to eight more interest rate cuts and urged Fed chair Jerome Powell to make them in January instead of December. He also anticipated four different rounds of rate cuts in 2025.

“If the Trump administration can lay out a credible plan to reduce the budget deficit, then mortgage rates can move downward,” he commented.

Another way to lower the deficit would be to bring down the price of housing, he said. “We have to have more supply.”

Sales of existing homes were weak in 2023 and 2024 is expected to follow a similar pattern, though pending home sales did rise in September. However, Yun forecast a 10% rise in existing home sales in 2025 and 2026. New home sales could rise 11% in 2025 and 8% in 2026, along with a 2% increase in the median home price in both years.

Meanwhile, the gap between the estimated net worth of homeowners ($415,000) and renters ($10,000) widened in 2024. The homeownership rate is much lower for younger Americans, while first-time buyers have difficulty penetrating the market.

“Homeowners’ wealth rises steadily while renters’ wealth does not,” said Yun. “If you don’t enter the housing market, you are in the renter class where wealth is not being accumulated. If you want to participate in the housing market, the sooner you get in, the sooner you accumulate wealth.”