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Spark of Optimism Amidst the Hesitation

    The stage is set for a market revival, but one crucial element must shift to unleash the pent-up demand that's been waiting in the wings. Lawrence Yun, Chief Economist at the National Association of Realtors, has tempered his 2025 existing home sales forecast due to lingering concerns over mortgage rates.

    Yun now predicts a 6% rise in existing home sales for 2025, down from his initial forecast of 9%. New home sales are expected to surge by 10%, while home prices will inch up by 3%. The 30-year fixed-rate mortgage, currently at 6.67%, is anticipated to dip to 6.4% by year's end.

    The downgrade can be attributed to the need for lower mortgage rates to unlock demand. While factors like rising inventory and strong job creation are in place for a rebound, interest rates remain a hurdle. The Federal Reserve's recent decision to leave interest rates unchanged has sparked hope that cuts may follow later this year.

    "I believe we'll see two or three rounds of rate cuts by early 2026," Yun said, citing the potential for inflation to ease as deregulation and lower energy prices take hold. Job growth, however, might be the tipping point, particularly given the millions of new jobs added in 2023 and 2024 during a period of low home sales.

    "This suggests that many people are poised to enter the market, provided the conditions are right," Yun noted, hinting at a potential surge in demand once interest rates become more favorable.