T
he past year has been a remarkable one for homeowners, with their overall net housing equity swelling to $35 trillion in 2024. This growth is largely due to the significant increase in home values over the past four years. As a result, consumers who have recently bought and sold homes continue to hold real estate agents in high esteem, with nearly 9 in 10 recommending them to friends and family.

    However, the past two years have been challenging for the real estate industry, with slow home sales and historically low housing affordability. But there are signs of improvement on the horizon. Home sales momentum picked up in the final months of 2024, driven by a steady increase in inventory and rising incomes that outpaced home price appreciation.

    The Federal Reserve's decision to cut short-term bank lending rates is also expected to boost the market. Although mortgage rates have not yet followed suit, they are likely to trend lower as inflation continues to decline. The new normal for mortgage rates will be between 6% and 7%, rather than returning to the 4%-5% range seen during President Trump's first term.

    A reduction in government spending could potentially lead to even lower mortgage rates, but this is uncertain. Privatization of Fannie Mae and Freddie Mac is also unlikely, as their guarantees allow for long-term borrowing and slightly lower interest rates. The economy and jobs are other positive factors for home sales, with gross domestic product growing near 3% recently and ongoing job gains filling the housing demand pipeline.

    As inventory increases and mortgage rates stabilize, it's likely that existing-home sales will reach 20 million over the next four years, accompanied by solid new-home sales of around 3.5 million. The combination of lower inflation, reduced government spending, and a strong economy sets the stage for a robust real estate market in the coming years.