NAR Economist Downgrades 2025 Sales Forecast, Eyes Big Rebound in 2026

The National Association of Realtors (NAR) Forecast Summit on July 16 painted a cautiously optimistic picture of the housing market’s future — with a tempered short-term outlook and a potential surge on the horizon.

Resetting Expectations for 2025

NAR Chief Economist Lawrence Yun revised his 2025 home sales forecast downward during the summit, now expecting just a 3% increase over 2024. That’s a sharp drop from his March projection of 6%, and even further from the 9% growth he predicted late last year.

Why the backpedal? Persistently high mortgage rates. Yun cited the 30-year fixed mortgage rate hovering near 7% through much of the spring — historically high enough to cool buyer enthusiasm during what’s usually peak season.

“So far, it’s been a bummer,” Yun admitted during the summit.

But there’s hope. Yun believes if mortgage rates dip closer to 6% by year’s end, 2026 could see a robust rebound — possibly a 14% jump in home sales.

The “Magic Bullet” for Buyer Demand

Yun reinforced his belief that mortgage rates are the key to unlocking market momentum. Using NAR’s newly launched Market Statistics Dashboard, he showed that a 6% rate could generate over 550,000 additional home sales across the U.S. within 12 to 18 months.

The dashboard — introduced just a day before the summit — lets Realtors access real-time sales, pricing, and demographic data, helping them visualize how shifting mortgage rates affect affordability in different markets.

Despite sluggish sales activity, Yun pointed out that the broader housing market remains solid. Home equity is strong, delinquency rates are low, and many Americans now own their homes outright. "Real estate is on very solid ground," he said.

First-Time Buyers Face an Uphill Battle

While Yun focused on mortgage rates, NAR Deputy Chief Economist Jessica Lautz spotlighted the shrinking share of first-time homebuyers — now at a record low of 24%. She attributed the decline to affordability challenges, including high prices and stiff competition.

Lautz encouraged agents to help first-time buyers shop during the winter months, when competition typically softens. “They have a little more to work with,” she said, noting that less bidding pressure could improve the odds for buyers without equity.

Migration Trends Still Favor the South

Migration patterns continue to show Americans flocking to the South, drawn by strong job markets and relative housing affordability. NAR Economist Anat Nusinovich said Texas remains the top destination, though its growth has slowed.

Meanwhile, Western and Midwestern states are starting to see more movement, with notable year-over-year migration increases in Utah, Nevada, and Washington. Loan applications in the South are up, indicating not just movement — but serious buying intent.

Looking Ahead

While 2025 might not deliver the boom many hoped for, the outlook for 2026 is notably brighter — if, and it’s a big if, mortgage rates trend lower.

As Yun summed up, the foundation of the housing market remains healthy. But without a meaningful drop in borrowing costs, that strength may not translate into the volume of sales the industry is hoping for — at least not yet.