Economists Offer Optimistic Housing Market Forecast, but Trump’s Policies May Complicate Outlook

November 13, 2024 — Despite challenges over the past few years, economists are projecting a positive rebound in the U.S. housing market, with a focus on increased home sales in the coming years. Chief Economist Lawrence Yun from the National Association of Realtors (NAR) forecasts a 9% rise in home sales in 2025, with an additional 13% gain expected in 2026. However, incoming President-elect Donald Trump’s stance on interest rates may influence the housing trajectory and introduce economic uncertainty.

Forecasted Growth in Home Sales

Speaking at the annual NAR NXT conference, Yun expressed optimism about the future of the housing market, highlighting that job growth and mortgage rates are key drivers of home sales. “When more people work, they’re in a better position to buy a home,” Yun said. His forecast, backed by expected job stability and mortgage rate cuts, paints a hopeful picture of economic recovery.

Yun also expects that mortgage rates, which have risen sharply since 2022, will see four separate rate cuts in 2025. This reduction could make home buying more accessible, fueling the projected growth in home sales.

Mixed Economic Signals from the Mortgage Bankers Association

While NAR’s forecast is positive, the Mortgage Bankers Association (MBA) is less optimistic, predicting slower economic growth over the next few years. Following a 3.2% GDP increase in 2023, the MBA expects growth to slow to 2.3% by the end of 2024 and continue at below 2% annually through the coming years.

Residential investment, which saw a robust 2.5% growth in 2023, is projected to rise by only 0.1% in 2024, with growth stabilizing between 1.1% and 3.3% in the following years. The MBA also predicts inflation will stabilize, with annual consumer price increases ranging from 1.9% to 2.3%.

Trump’s Interest Rate Policies Could Influence Housing

The biggest unknown for the housing market lies in President-elect Donald Trump’s policy plans. Trump has frequently criticized Federal Reserve Chair Jerome Powell’s approach to interest rates, expressing a preference for lower rates. Trump’s stance could put pressure on the Federal Reserve to accelerate rate cuts, though such actions may face resistance if they appear to compromise the Fed’s independence.

Lower interest rates could benefit home buyers by reducing mortgage costs, but excessive rate cuts could fuel inflation and complicate long-term economic stability. Economists are closely watching how Trump’s policies might affect the Federal Reserve’s decisions, as these will likely influence the overall health of the housing market.

Navigating Economic Uncertainty in the Housing Market

While the NAR’s forecast offers hope for a robust recovery in home sales, the interaction between Trump’s policies and existing economic factors introduces complexity. Should Trump advocate aggressively for rate cuts, the housing market could benefit from lower borrowing costs but may face risks if inflationary pressures rise.

For Sheboygan Reports readers, the housing market outlook underscores the interplay between federal policy and local economic realities. As mortgage rates and job growth continue to shape the market, the upcoming changes in U.S. leadership may add both opportunities and challenges for prospective homebuyers and the broader economy.