NAR chief economist: Housing inventory on the upswing

A confluence of economic forces is bringing about a nationwide increase in housing inventory, according to a National Association of Realtors economist.

Lawrence Yun, chief economist of the NAR, provided market guidance to real estate agents this morning at an economic forum held by the Greater Springfield Board of Realtors at B&B Theatres in Ozark. A full house of industry professionals attended the event.

Yun said homeowners who bought residences when mortgage rates were around 3% have been essentially locked in as rates have increased in recent years, leading to inventory challenges for real estate agents and potential homebuyers.

Still, he sees inventory increasing as life changes spur those homeowners to sell. He pointed to some 3.5 million newborn babies a year, 1.5 million marriages, 700,000 divorces and 25 million job switches among data that is influencing housing trends.

"When life has moved on, you have to give up the 3% mortgage rate," Yun said. "With the passage of time, which is occurring every single day ... you have more and more people falling into this circumstance."

Existing home sales, which have been in the negative starting around 2021-22, are nearing the zero line and crossing it, he said.

"We are grateful that inventory is beginning to rise, but it still needs to rise substantially," Yun said.

Yun said the Federal Reserve's recent rate cut – and more expected cuts on the way – would help the housing inventory situation, as well, but he cautioned that the Fed controls the federal funds rate, not mortgage rates.

“Homebuying is not an immediate decision," he said. "Immediate low interest rate does not mean immediate higher home sales."

Yun said the days of the 3% mortgage rate are likely gone and that a "new normal" is settling in at around 6%. Yun said he doesn't see the rate going much lower than that, as current mortgage rates already have factored in the possibility of Fed rate cuts.