Vol. 2025 - Issue 12 - Builders Outlook
NAR Study: Steady job growth and lower rates could fuel a sales surge
Real estate professionals may finally see a long-awaited surge in activity in 2026, with home sales poised for a potential double-digit jump.
Lawrence Yun, chief economist at the National Association of REALTORS®, is forecasting a 14% nationwide increase with home sales for 2026, following 2025’s stagnating levels. New-home sales are also projected to rise 5% next year.
“Next year is really the year that we will see a measurable increase in sales,” Yun told attendees Friday at the Residential Economic Issues and Trends Forum during NAR NXT, The REALTOR® Experience, in Houston.
Rising sales won’t come at the expense of price stability either: “Home prices nationwide are in no danger of declining,” he said. NAR expects prices to climb 4% in 2026, supported by job growth and persistent supply shortages.
Nationwide Forecast Slide
Early Momentum: Jobs, Mortgage Applications and Builder Activity
The groundwork for a rebound may already be forming. Mortgage applications are trending higher, job gains remain steady, homebuilders continue to add supply, and the record-breaking 43-day government shutdown—that could have delayed some recent home sales—is finally over, Yun said.
“Mortgage applications have been consistently above last year, implying that people’s desire to enter the market has been consistently positive,” Yun said. In the latest week, mortgage applications for home purchases surged 31% higher compared to a year ago, the Mortgage Bankers Association reported.
Mortgage Rates: A Slow Drift Downward
Mortgage rates remain one of the biggest constraints for buyers. After sitting around 7% at the beginning of the year, the 30-year fixed rate averaged 6.24% this week, according to Freddie Mac.
Yun expects gradual improvement ahead. “As we go into next year, the mortgage rate will be a little bit better,” Yun said. “It’s not going to be a big decline, but it will be a modest decline that will improve affordability.”
He forecasts rates to average around 6% in 2026, down from a roughly 6.7% overall average for this year.
While the Federal Reserve has initiated rate cuts, Yun cautioned mortgage rates are influenced by a wide mix of factors—including inflation, Treasury yields and federal borrowing—so buyers shouldn’t bet on 3% rates to return. Still, even minor decreases in mortgage rates could unlock substantial buyer activity, he said.
A Market of Haves and Have-Nots
But the path to a 2026 rebound won’t look the same across the market, as today’s housing market remains deeply uneven.
“The upper end of the market has been doing much better than the lower end,” Yun said, with robust inventory and strong financial markets fueling activity. Sales in the $750,000 to $1 million price range have seen some of the largest gains. Meanwhile, inventory remains constrained at lower price points.
Also at Friday’s session, NAR Deputy Chief Economist Jessica Lautz pointed to the widening gap between buyers with home equity and those trying to break into the market.
“We have haves and have-nots,” she said. “First-time home buyers are really struggling to get in, while those who have housing equity are building credit.”
According to NAR’s newly released 2025 Profile of Home Buyers and Sellers, first-time home buyers dropped to an all-time low of 21%, well below their 40% norm. They’re also much older than in the past—a median age of 40.
Young adults still aspire to homeownership, Lautz emphasized, but obstacles remain steep, like high rent, student loan debt and childcare costs. Better financial education about down payment assistance and special loan programs, like FHA, may help, she added.
Meanwhile, repeat buyers—especially baby boomers—are dominating the housing market, often buying with cash or tapping the substantial home-equity gains they’ve built over years of ownership.
So, while 2025 was mostly a stagnant year for housing, Yun believes the conditions for a meaningful recovery are falling into place for 2026.
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Executive Message • RAY ADAUTO
Closing out 2025 with optimism for 2026
Surprise and gratitude for ‘Ray Adauto Leadership Legacy Award and a personal thank you to Margaret mark the end of a trying year
Well, we are done with 2025, or at least we appear to be. This was a strange year (again) with politics and celebrations mixed in to our everyday life. It’ was our 79th anniversary as an association, a milestone, a yardstick some would say. What is not said often enough is we are here because of your trust and support. Our membership varies year by year, fluctuating along the way. Our longtime members have supported through good times and not so good times. Our one goal is to ensure that El Paso and Hudspeth Counties have a viable and strong new home construction environment. Our job is to take your singular existence and mold it into a group chartered to be your voice at the city, county, or state. We do a pretty good job being that voice, but again, we cannot do this without you.
On a personal note, my deepest appreciation to the Board and Past Presidents in honoring me with the Ray Adauto Legacy of Leadership Award. It was and is a shock that my family and I will always treasure. I hope to live up to your trust and thank you for all you have done for me. We often say we are in this together but watching you and the installation guests say thank you was a bit overwhelming.
Finally, I would like to offer special thanks to my administrative assistant and life partner Margaret. She has threatened retirement for several years, but it looks like this is for real. After 19 years she will leave an everyday void. There is no way to replace her. Margaret, on behalf of a grateful association, THANKS! Enjoy your next adventure.
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Builder Sentiment Inches Higher; Year ends in Negative Territory
NAHB
Builder confidence inched higher to end the year but still remains well into negative territory as builders continue to grapple with rising construction costs, tariff and economic uncertainty, and many potential buyers remaining on the sidelines due to affordability concerns.
Builder confidence in the market for newly built single-family homes rose one point to 39 in December, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels were below the breakeven point of 50 every month in 2025 and ranged in the high 30s in the final quarter of the year.
“Market conditions remain challenging with two-thirds of builders reporting they are offering incentives to move buyers off the fence,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C. “Meanwhile, builders are contending with rising material and labor prices, as tariffs are having serious repercussions on construction costs.”
“In positive signs for the market, builders report that future sales expectations have been above the key breakeven level of 50 for the past three months and the recent easing of monetary policy should help builder loan conditions at the start of 2026,” said NAHB Chief Economist Robert Dietz. “However, builders continue to face supply-side headwinds, as regulatory costs and material prices remain stubbornly high. Rising inventory also has increased competition for newly built homes.”
In a further sign of ongoing challenges for the housing market, the latest HMI survey also revealed that 40% of builders reported cutting prices in December, marking the second consecutive month the share has been at 40% or higher since May 2020. It was 41% in November. Meanwhile, the average price reduction was 5% in December, down from the 6% rate in November. The use of sales incentives was 67% in December, the highest percentage in the post-Covid period.
Derived from a monthly survey that NAHB has been conducting for more than 40 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
The HMI index gauging current sales conditions increased one point to 42, the index measuring future sales rose one point to 52 and the gauge charting traffic of prospective buyers held steady at 26.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 47, the Midwest rose two points to 43, the South increased two points to 36 and the West gained four points to 34.
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ECONOMIC OUTLOOK
Flatlining Flats
October existing home sales were 4.1 million annualized units, essentially unchanged from September’s 4.05 million units. For some perspective, this is the same activity level that prevailed in 10/08, during the middle of the Housing Bust and a month after Lehman Brothers collapsed. It’s about 20% lower than the worst month in 2001 during the dotcom bust, and lightyears away from the 2021 peak of 6.6 million. The recovery waits.
Fed Figures
Unsurprisingly, the Fed lowered rates by 25bps because ongoing labor market deterioration concerns more members of the Fed than the elevated inflation levels. Despite heated rhetoric about strong reluctance to cut more, like what was said in October, they’ll cut more. As for buying T-bills, don’t confuse it with QE, that requires buying long bonds. Substantially more data will be available by the next meeting, which could meaningfully change policy.
Penny Pincher
On 11/12/25, the last US penny was minted. The Mint reported $85.3 million lost on the nearly 3.2 billion pennies it produced at a cost of 3.69 cents each. The present value of the savings to taxpayers is $2.1 billion. However, due to a preponderance of cash transactions ending in 8 and 9, the loss of the penny introduces a small net “rounding up tax” of about $6 million/year.
Powell Persuasion
Core PCE, the Fed’s favorite inflation measure, was 2.8% Y-o-Y in September (yes September), down from August’s 2.9%. Better yet, core PCE came in at 0.2% M-o-M for the fourth time in five months. The three-month trend is running at a benign 2.2% annualized pace. Expect a Fed cut. However, getting the cut past a hesitant/averse board may require Powell to underline reluctance to soon cut again, a hawkish stance.
Big Billionaires
I’m sure you will be thrilled to know that the number of global billionaires now totals 2,900, a rise of 287 from last year, the second biggest jump ever. Their collective wealth is now $15.8 trillion, up from a paltry $14 trillion last year. Of the new billionaires, 196 are self-made and 91 (very lucky people) inherited their new status, not to mention $298 billion.
Deceiving Data
Don’t be fooled by the initial jobless claims data, because companies are reducing employment without layoffs. Businesses are closing positions that become vacant. So, while there may not be a “firing cycle,” there is indeed an “attrition cycle” amongst us. This is why the backlog of continuing claims for unemployment keeps making new cycle highs, and why the ranks of the long-term unemployed keep expanding.
Token Tariffs
Import prices are where at least some tariff impacts would manifest themselves. Yet M-o-M September import inflation was 0.0%, August was a miniscule 0.1%, and July was 0.3%, it appears to be declining. Additionally, Y-o-Y import inflation is a benign 0.3%. Strip out oil, and M-o-M import inflation in both August and September was 0.2%, and Y-o-Y it’s been flat as a hockey rink at 0.8% since 6/1/25. Cut rates.
Warner War
Netflix or Paramount, who should get Warner? Money is no object for either bidder. If Netflix, the #1 streaming service buys the #4 streaming service, that’s somewhat troubling. But so is the fact that Paramount’s bid, which would combine the 4th and 5th biggest streaming services and maybe gives Netflix a real challenge, is being primarily financed by Abu Dhabi, Qatar (OMG), and Saudi Arabia. Maybe another bidder steps up?
Few Firings
With the government now operating, we are getting waves of data. Weekly first-time claims for unemployment insurance are now in and the news is excellent. Initial jobless claims fell to 216,000 for the week of 11/22/25, their lowest since the week of 4/12/25. Better yet, since 10/1/25 initial claims have been tightly range-bound between 216,000-235,000. Despite massively large corporate layoff announcements, the data suggest firings remain few and far between.
Economic & Policy Blog
Elliot Eisenberg, Ph.D. is an internationally acclaimed economist and public speaker specializing in making economics fun, relevant and educational. Dr. Eisenberg earned a B.A. in economics with first class honors from McGill University in Montreal, as well as a Master and Ph.D. in public administration from Syracuse University. Eisenberg is the Chief Economist for GraphsandLaughs, LLC, a Miami-based economic consultancy that serves a variety of clients across the United States. He writes a syndicated column and authors a daily 70-word commentary on the economy that is available at www.econ70.com.
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