2025 NAR forecast: Existing home sales, 30-year fixed mortgage rate, housing starts
At this rate, more buyers are expected to come back to the market, boosting activity. When mortgage rates fall below 6.5%, the qualifying income required to purchase a median-priced home drops below $100,000, which is less than the estimated median family income. If rates stabilize around 6%, about 6.2 million households can once again be able to afford median-priced homes, compared to the current constraints with rates near 7%.
While housing shortages remain a long-term constraint, inventory levels are gradually improving and poised to increase further in 2025. This uptick is anticipated to result from a combination of new construction projects and homeowners deciding to list their properties, encouraged by stabilizing mortgage rates and improving market conditions. Lower rates can significantly benefit homebuilders by reducing financing costs and boosting market confidence. This is expected to lead to increased construction and housing starts approaching the historical average annual level of 1.5 million units in the next couple of years.