NAR Chief Economist Gives Market Update

The market is better now than a year ago, according to Lawrence Yun, NAR chief economist and senior vice president of research, who spoke to Realtors® during NAR’s annual convention in San Francisco last month.

“Last year, the interest rates went to 5% and consumers were pulling back. Now they’re down to 3.7%. Home sales are a bit higher this year. That’s the magic power of low interest rates,” Yun said.

“Mortgage rates are very affordable at 3.7% and sales are increasing,” he added.

Existing and new home prices are rising and new homes are priced higher than existing homes. Yun said research shows buyer traffic is better than a year ago as well.

“Eight years after the crisis, homeownership rates were at a low point of 63%,” Yun said. “They’re now at 65-68%. And millennial homeownership rates are beginning to pick up at 34-38%.”

First-time homebuyers are more sensitive to the higher interest rates. “When rates are rising, we see a lower level of buying from first-time buyers,” he said.

New home construction is lagging as well. “Housing starts are insufficient,” Yun explained. “We have underbuilt for 10 years. We need more construction to tame housing inflation. This is driving up rental and housing prices and we’re seeing lower inventory than we did last year.”

“Building more homes will increase the GDP growth rate,” he continued. “There were fewer houses built this year than last. We need to build more homes.”