2025 Housing Market Forecast: NAR Chief Economist Dr. Lawrence Yun | Title Agents Podcast Ep36

In a world where change is the only constant, Mo Shamil stands at the forefront, guiding title professionals to not just grow their businesses, but to master the art of innovation. With every episode, you're handed the keys to unlock unparalleled growth and stay ahead of the curve. Get ready for a transformative journey. Hello, everyone, and welcome to the Title Agent Podcast, the go-to show for title professionals looking to stay ahead of industry trends, embrace innovation, and grow their businesses. I am your host, Mo Shamil, CEO of Alltech National Title.

And today, we have an incredible guest, one of the most respected voices in real estate economics. Joining us today is Dr. Lawrence Yoon, the Chief Economist of the National Association of Realtors. If you've ever followed housing market trends, you've likely heard his insights on everything from mortgage rates to home sales projections. With the real estate market facing shifting interest rates, inventory challenges, and evolving buyer behaviors, there's no better time to get his expert take.

In this episode, we'll dive into what's ahead for the housing market, how economic trends are shaping the title industry, and what title professionals should be paying attention to in 25 and beyond. Well, Dr. Lawrence, welcome to the Title Agent Podcast. Thank you, Mo, for having me. Well, let's start off, give us a little bit about your background, where you grew up, your path to economics, and specifically real estate.

You know, life takes people to unexpected directions, because I don't think people really know. So I was born in South Korea. My family, my parents immigrated to the US. We settled in South Carolina, where I did my middle school, high school, elementary school as well, because I remember fourth grade was when I came to the US. And then I got my engineering degree because I was just a math person.

But then I found out that economics is very interesting, completed PhD in economics at University of Maryland, worked at Pew Consultancy, and then I have been working at the National Association of Realtors for 25 years. Wow. Wow. Even for me, just looking back, it's many years. Yeah.

I just want to thank you again for being on the show. When I ran into you, we sat next to each other in a flight from DC to Chicago and recognized you. And I'm very thankful and grateful for your time again. Yeah. The office that I work in is in Washington, DC.

Our headquarters in Chicago. So I had a meeting over in the headquarter office. But very good to meet you in the airplane. So given everything happening in the real estate industry, how would you describe the current state of the housing market? Are we in a period of stability transition or continuing volatility?

The housing market generally tends to be stable except for the past few years. We saw the frenzy boom activity in the early years of COVID due to the low interest rate environment. And then in 2023, 2024, the past two years, one of the lowest home sales activity. So naturally, anyone in the business, whether it is realtor, mortgage originator, moving truck, titled insurance, it's a tough environment. But we have seen some pick up late last year when we compare with comparable period the year before, say October versus October, November versus November and so forth.

So I'm encouraged that the worst is over. And let's just hope that mortgage rate, the big magic form of magical impact to the market begins to descend a little lower mortgage rates, but clearly bring more life to the housing market. Yeah. I'm not sure if you have a gauge on this, but how are buyers and sellers feeling right now? Have recent economic pressures and industry shifts changed their behaviors?

Well, you know, we have 88 million homeowners across the country. They're all happy. So I always say to the realtors, your past clients are super happy that they got their real service. Home prices have risen. That's all housing wealth.

So the homeowners are doing very well. Now we do have not that many home sellers because we are all aware of the lock in effect. But the inventory is beginning to rise a bit. I think life changing events that is constantly ongoing, marriages, divorces, death in the family, maybe a new job at different town, maybe a school district, all this life changing events leads to people needing to change residence. And we are beginning to see that inventories are beginning to rise despite the lock in effect.

In theory, they should be in place. Let's shift gears to the NARS elements and its impact. The NARS elements has been a major headline for the last two or three years now. Can you break down what the settlement actually means for agents, brokers and consumers? Agents, they're entrepreneurs, business owners, just like restaurant owners.

There are rules to go by. So I guess the change in rules post-settlement is the buyer agency form. People have to sign the buyer agency form before showing a home. Some people say this is cumbersome. People just want to see a home.

Why do I have to sign buyer agent form? Well, this is a new rule in the game. So as business owner, we all know some rules make perfect sense. Other rules do not make sense. But entrepreneurs adapt to those situations.

And what I'm hearing from realtors is that, yeah, they are getting the buyers to sign the form. Buyers at first may be a little hesitant, but then they said, yeah, it didn't make sense. So I think people have adjusted to it. So in the first few months, a little confusion. But now I think people are just used to it.

You need to buy a home. You have to sign the form. One of the key concerns is how commissions might shift. Do you foresee a significant reduction in Asian commissions or has it reduced so far? And how might that impact the industry structure?

One thing about this lawsuit that came about from the trial lawyers, a few homeowners upset about their service. Well, if you're upset, just find another realtor who can provide better service or negotiate for something better. Because in America, we have the best of the world. We have full service brokerage, discount brokerages, minimal service brokerage, or you can do by yourself. I don't know why they need to bring the trial lawyers, but it was a perfectly competitive market out there.

But the market will determine what the commission will settle down. What I'm hearing right now is that for the most people, the home sellers, in order to get the deal done, they are offering buyer agent compensation for that. But let the market do it, because good thing about America, so much competitive market out there from do it yourself. Most Americans prefer not doing by themselves. They want to work with a professional.

So we have to respect that. Some people want to use discount brokerage, other people full service. Let the consumers choose. We just don't need trial lawyers that are going after restaurant business, going after title insurance business or whatnot. So I think as America, we have to really look at the legal system to say, is it possible that trial lawyers just shuffling papers constantly attack business owners?

But given what it is, realtors are adapting to the new rules and they're serving their clients. Yeah. As you know, the only person that wins in a class action lawsuit is the attorneys. Because the consumer may get a few hundred bucks, but the attorneys get like a hundred million dollars. It's insane.

Whatever that number was. Yeah. You know, another sort of paradoxical part of this is that when we take survey of recent homebuyers, recent home sellers, 90 percent of consumers said, oh, I love my realtors. Or at least they expressed that sentiment by saying, I would recommend my family members to my realtor, not other realtors, by the way, their realtor or business colleague to their realtor. So this is a very high satisfaction rate, 90 percent satisfaction rate.

Note that I did not say 100 percent. So naturally, there are some people who are not happy, but just find another realtor or do it yourself. You know, I don't know why trial lawyers are always trying to go after, you know, maybe one or two victim and then do a class action lawsuit. Yeah. So with the potential income pressures on the commissions, do you anticipate a decline in the number of real estate agents or has there been a decline or something that you have been on?

You know, we have to go back to a year 2000 where we had about 700,000 real estate agents. You know, then we had the post-COVID boom, that low interest rate environment situation where our membership reached over one point five million based on the market condition where home sales have been this low. The finance committee of the NAR, very prudent. They want to make a conservative estimate on the membership because, you know, market will determine whether it should be one million members, what not, let the market determine. But it is way above what we have been projecting.

So I'm quite amazed at the resiliency of the realtor members who want to stay in the business, give it a try. They know the market is tough, but entrepreneurs knows the cycle ups and downs of it. And we just say, well, you know, if people want to go into the business, let them, if people gave it a try, but it did not work out, drop out, well, you know, that's what it is. But the numbers overall is surpassing what our finance committee has been projecting for just budgetary reasons. That's fantastic.

of the realtor members who want to stay in the business, give it a try. They know the market is tough, but entrepreneurs knows the cycle, ups and downs of it. And we just say, well, you know, if people want to go into the business, let them, if people gave it a try, but you did not work out, drop out, well, you know, that's what it is. But the numbers overall is surpassing what our finance committee has been projecting for just budgetary reasons. That's fantastic.

Let's, let's talk about the economic pressures, inflation, interest rates and deficit. So the inflation has been persistent and I'd be stickier than expected. How is this affecting mortgage rates and buyer affordability? You know, mortgage rate after hitting almost 10% few years ago, you know, people were angry at that high inflation. The Federal Reserve raised interest rate in order to contain inflation and it brought the inflation down to 2.5%, which is almost the desired target rate.

I guess their true target is 2% inflation. But in the past few months, inflation picked up again now at 3% and consequently mortgage rate is not lacking that inflation is therefore a mortgage rate refused to go down even as the Federal Reserve has cut interest rate in September, did it again in November, another cut in December, yet mortgage rate keep going up because of the inflationary pressure. So we need to make sure that inflation is fully contained and let's see how it goes. But I anticipate inflation to be calmer just because we have oversupply in apartment, currently with so much apartment vacancy, I anticipate that rent pressure will lessen and the rents are one of the big driver of overall inflation. But unfortunately that the rent data, it's only comes out every six months.

So it takes, it's a, there's a lagging indicator, I guess it's not like every month it adjusts. We measure inflation every month, but a key factor of that inflation data is only every six months, which is going to, sometimes there's a delay. Mo, you are absolutely correct. Right now we are seeing little delay in my view in the official rent data metric, which is showing about five, close to 5% increase in rent. Many apartment owners will say, you know, we did raise rent few years ago, but right now we're no longer raising rent from what it was one year ago.

So it appears to be a little discrepancy between what the apartment owners are saying versus what the official government statistics is implying. And going back to the, we talked about the Fed cut rates by a hundred basis points, yet the 10-year treasury and mortgage rates went the other direction, another hundred basis points, like a 200 point spread. And it seems like the reason for that, and I would love your take is that there was not much demand for buying US treasury, especially from sovereign funds in other countries. Was that a key factor for that or the different factors? You know, 10-year treasury has a big impact on mortgage rates.

So how much appetite is there for government bond or government note like 10-year treasury? And the indication is that they're just adjusting to the inflationary pressure. I don't think it's necessarily a dumping of the 10-year treasury situation. I know that China has been reducing some of their holding, but at the same time, Japan has been picking up whatever China was selling. So I think once we contain inflation, it should not be a concern.

Now, of course, we have very high national debt. Anytime there's high national debt, people feel uncomfortable lending to the country with high national debt. So there will be a concern, but United States, being United States, 10-year treasury being the benchmark bond yield, I don't think that is, you know, people not desiring the credibility of the U.S. government. But it's more of the case that inflation has not been fully contained.

And that's why we are seeing a little higher 10-year treasury and furthermore, higher mortgage rates. Yeah, I told you in my email exchange, I was at a conference last week, an economic and finance conference, where Ray Dalio was one of the speakers. And he talked about the debt service, 7% of the GDP. And it's unsustainable. The key number is 3%.

And he even mentioned the debt we have, I don't think we can ever pay it. Something has to give. It's so much debt, it's like, he said, it's almost impossible to pay that debt. I would love your thoughts about that, getting from 7% to 3%. And he said, if we don't do anything in the next two or three years, something major is going to happen to the economy.

Well, you know, the figures are very high. They said 3% of the GDP should be the deficit level, not anything beyond that. But right now, the US is way above that. But then you look at other countries, China above that, Japan above that, France, nearly every country is. That is one reason why the dollar is still strong.

We have high national debt. But because other countries' financial situation is even worse than the US, or perceived to be worse, that dollar is still strong. But let's look at alternative to the dollar. Gold prices, record high. Cryptocurrency, record high.

So there is some indication that people are feeling uncomfortable with paper currency. Now, in the real estate industry, historically, real estate was also an alternative to paper currency. So it could be that real estate value may rise over time a little faster as people become uncomfortable, say, lending to the US government, or the paper currency is viewed less with credibility than before. So if people want to hedge, I see that people are hedging with gold or cryptocurrency. But real estate is an option.

Yeah, definitely. All the hard assets are valuable. And real estate is one of them. So definitely prices will be going up if this inflation stays kind of persistent. Let's talk about the inventory and housing supply challenges.

The inventory remains at historic lows. What are the main factors keeping housing supply constrained, besides the obvious? Yeah, the locking effect. People bought their home at 3%. Now if they want to buy a home right across the street at 7% mortgage rate, they say, well, it doesn't make any sense.

My mortgage payment doubles. So they don't want to sell. But as I mentioned, we have had a historically low inventory level the past two years, which was one key reason constraining home sales condition, lack of inventory. But it looks like with the passage of time, there are more life-changing events constantly accumulating. And now we are seeing about 20% more inventory.

I think by December of this year, we may have about 50% more inventory compared to December of what it was just a few months ago. So I do see that inventory, worsening inventory is over. But we still will not be back to pre-COVID level normal inventory. It may take another, say, two years to get us back there. Are builders ramping up construction or are high material and labor costs keeping them hesitant?

The builders are doing normal activity now. Homebuilders actually squeaked out two straight years of gains. Newly constructed home sales increased in 2023, 2024. So as realtors were challenged, homebuilders actually made gains. And because they are in a position to create inventory.

Now, I would say that the inventory situation for the builders, eight months supply on the newly constructed home may be a little high, but somehow they're still able to crank out a profit. So as long as they were able to crank out profit and pass on whatever cause, whether tariff on the lumber, other part they can pass on their cause, then they will continue to produce. But tariffs, labor shortage in the construction industry, those are something to watch because the builders reduce production, then, you know, we will face this housing shortage persisting for longer. Are institutional investors making the supply crunch worse or are they playing a necessary role in stabilizing the markets? You know, the investors were very helpful during the Great Recession back in 2008 through 2010 period.

Massive foreclosure property. People are not buying. Investors picked it up. So in a sense, they helped stabilize the market condition. In the current environment where we are short on inventory, national impact of the institutional investors, not the mom and pop, mom and pop investors will always be there.

The institutional investors nationwide, I would say they are not a significant player, but in individual market like Atlanta, Dallas, Memphis, they are putting a large pressure in terms of gobbling up and therefore fewer homes available for, say, first-time buyers condition. So our realtors in Atlanta, Memphis have clearly raised the issue. But you know, real estate investors, the institutional investors, they're taking the risk. And I think the reason why they are in the market is because we have housing shortage. If we don't have housing shortage, then we're But in individual market like Atlanta, Dallas, Memphis, they are putting a large pressure in terms of gobbling up and therefore fewer homes available for, say, first time buyers condition.

So our realtors in Atlanta, Memphis have clearly raised the issue. But you know, real estate investors, the institutional investors, they're taking the risk. And I think the reason why they are in the market is because we have housing shortage. And if we don't have housing shortage, they will step away and try to put their money in other investment. But they are going after real estate because they see the housing shortage.

So to the degree that that is the case, any policy to boost construction, you know, provide federal land for the builders to do some economic development, some state land possibly could be turned over to the building activity, maybe reduce some of the regulation in the building activity. Anything to boost building automatically means more supply, which will be welcome. Furthermore, institutional investors will see increased supply and step away from the market. I would imagine Austin or Texas in general would be a good example, like the little oversupply in Austin. Oh, yeah.

The regulations were so eased up and. You know, Houston is one city where there is actually no regulation to build and people just build it anytime they want. So Houston is a moderately priced market. It never spikes up just because builders can respond to the increased demand. Unlike say in Silicon Valley, somehow there's a technology boom and, you know, people get stock options.

They want to buy a two million dollar home. Well, if there's insufficient amount, they will keep bidding up the prices. So in the supply constraint market, sometimes you see huge peaks in prices. But as long as there is a steady construction to meet the demand, then the price home price growth will be very modest and manageable. So as far as policy as a solution, what policy changes with the zoning reforms, incentives or tax adjustment could help ease the inventory crisis?

You know, one thing that National Association of Realtors, my company, the realtors who I work with, you know, they are saying, well, what about those homeowners, especially elderly homeowners who have sizable housing equity? You know, they bought their home 30 years ago for, say, $100,000. Now the home is worth $800,000. If they were to sell their home, they have to pay a huge amount in capital gains tax. So what we are asking Congress is to say that the capital gains exemption amount, $250,000 for a single individual, half a million for a married couple.

All the people in the real estate industry are aware of it. The figure has not been changed for 30 years. Everything else appears to be rising. Social Security check is rising. Price of everything is rising.

We're just saying index to inflation. And if we were to index to inflation over the years, the amount would be roughly double, about half a million for single, about a million dollar exemption for a married couple. So since we're talking about policy, with the new administration and DOGE, the Department of Government Efficiencies, that's what it's called. What do you think, like, the cuts in jobs in the federal government and all the efficiencies that Elon and the government is trying to get, or what impact do you see, if any, like on unemployment, inflation, and cutting the budget? It's really a D.C.

area impact. Rest of the country, we're not, you know, it's minimal. I know that, for example, I mean, there are some like CDC in Atlanta that could be impacted. Some other local areas could be impacted from slashing of the job. But let's look at why they are slashing the jobs.

First, I think it's just common sense to say any wasteful government spending, just cut it out. You know, just wasteful government spending, just cut it out. Of course, we don't want to cut the muscles and the bones. For example, I think this morning there were announcement about large cut in the FHA at the HUD employees. I hope FHA loans do not get impacted.

So if they're identifying the fat, that's fine. But if they're cutting the muscles, well, that's going to reduce first-time buyer chance to get into the market. Furthermore, say Fannie and Freddie, very important to the mortgage market. President Trump, being a real estate person, I think he understands the importance of steady lower mortgage rate than, say, purely private, say like the jumbo mortgage rate condition. So despite what his advisors may say, I think President Trump will say no.

I think Fannie and Freddie is important. But reducing the wasteful government spending, throwing down the national debt, that's going to help mortgage rates. So D.C. clearly, with more exposure to federal government employment, contractor and such, D.C. will see some impact.

But I think for the rest of the country, it could be a little lower mortgage rate from reducing the budget deficit. Yeah. Let's say in D.C., our home for you and I. So what impact do you foresee? Is it a price reduction or is it more inventory?

Is it more employment? If you had a crystal ball, what do you think? Well, you know, there's a lot of help want to sign in the D.C. area. And I'm not talking about the restaurant or, you know, the low-wage employment.

There's a lot of help want to sign. So maybe people who have lost out on the federal government, they can find jobs. Remember, 90 percent of the jobs in the D.C. area are the private sector. Only 10 percent work for the federal government.

And not all federal government will be laid off. I think, you know, maybe say 10 percent of 10 percent, that's 1 percent, you know, impact overall employment impact. Now, D.C. area has faced lack of inventory. So maybe in the upcoming months, we see a few inventories showing up on the market.

Just from housing market perspective, we need this inventory. We still have some residual multiple offer situation in northern Virginia. So just from purely from housing market impact, I think a little increase in inventory is a welcome condition. But sometimes, you know, there are some transitional impact. I think Elon Musk coming from the tech sector, I think the model in the tech sector in the Silicon Valley is move fast and break things.

You know, that's their model. I just hope that they don't cut the muscles. Cutting the fat, I think everyone is welcoming those conditions. But let's make sure they don't overdo it where it really reduces service. Like we don't want to see a reduction in service in FHA mortgage availability or Veterans Affairs mortgage availability.

So one of the, I guess, best ways to combat inflation is an increase of productivity. So with the AI and all the amazing last couple of years and what's coming like in the next few years, when will we see that kind of that productivity has been part of the data that the economy can actually measure it and have an impact on hopefully reducing inflation? You know, there was a Nobel Prize winner called Robert Solow many, many years ago. And he said computers, this is when the computers began to reach the desk of every office workers. Computers are now everywhere except in the productivity statistics.

So that's how he replied. So I think artificial intelligence right now is a new thing. I think it will be available widely used over the upcoming years. But the productivity impact may be still a few more years out beyond that. But you know, anything that boosts productivity, that's a welcoming thing.

You know, one thing result of the productivity growth is that number of hours people have been working, you know, at 100 years ago, it was normal for people to work 60 hours a week. Then it became 50, 40. Now, you know, it's something like 38 is not new normal. So anytime there's a productivity gain, our standard of living rises. We work less, we have more leisure hours.

We should welcome that. But of course, some people individually who are impacted, meaning that artificial intelligence is replacing their job, they will feel uncomfortable. But over time, you know, as long as there are other jobs being created that should mitigate some of the job loss impact from AI. Yes. The adage goes, you're not going to lose your job to AI, but again, it is your job to a person using AI.

What are your thoughts on that? That quote? Yeah. Yeah. You know, so we have to let the consumers decide.

So if the consumers want to use AI in real estate, I think there will be more home searches by consumers online. We have already seen that. But now with AI assistance, maybe they can hone in a little better or apart. But at the end of the day, what we are finding is that even with continuous technological availability, 90% of the consumers are saying, I want to work with the realtors. And after having worked with the realtors, 90% say, I am so happy I work with the realtors.

So I think that will continue to be the case. Yeah. As a realtor, is this focal or center point of trust in the real estate transaction? Like it's people, I mean, there's so much, so many moving pieces in a home transaction from emotional, from logistics, and a consumer's need that somebody to hold that. And after having worked with the realtors, 90% say, I am so happy I worked with the realtors.

So I think that will continue to be the case. Yeah, as a realtor, is that focal or center point of trust in the real estate transaction? Like it's a, people, I mean, there's so much, so many moving pieces in a home transaction from emotional, from logistics, and like a consumer's need that somebody to hold their hand, somebody can trust. So I don't see that going anywhere. Yeah, or even the fact, yeah, or even price negotiation or the fact that some consumers may say, wow, this is complex.

Am I getting ripped off by the home sellers and related to this? Or am I get, I think the realtors are there to essentially make sure that the consumer's interests are represented. And furthermore, everyone knows in a real estate, repeat business, referral business is so critical. Anyone who tried to cut the corners on a consumer, they will not exist one year from now. Their business model will collapse.

So I'm glad that America, we are allowing consumer choices and consumers are saying they wanna work with professionals and realtors are there to serve that need. Wow, if we're coming to a close here, if you had to sum up your expectations for the housing market this year in one sentence, what would it be? Recovery. So we will see a growth in home sales nationwide roughly 10%. I would not be surprised if we get 20% increase in home sales, but I could be wrong and maybe we wanna get 5% increase in home sales.

That'd be fantastic. I'll be happy with 5%. But I think it's a year of recovery. We are not getting back to 2019 pre-COVID activity. I think it's gonna be another two or three years before we reach that level.

Awesome, do you have a favorite quote? You know, one of the favorite quote, I guess is that life is not fair. That's a more humorous way to put it. What I mean by that is, you know, you stand in a grocery line and then other line move faster. So you can either be angry about it or say, you know, life is unfair.

I'm gonna just stay in this line, a little frustrating. I know other aspects of life, you know, is more serious part, but one has to understand that nothing is, you know, serve on a plate right in front of you. One has to maneuver through it. I guess in French language, they call it, they say, you know, salavi, meaning that's life. Salavi.

Salavi. So, you know, I think that's the way to view. So I, you know, do my daily activity with that way. Take it with humor rather than being angry. Yeah, and do you have a favorite book or a book that you read recently that you loved?

You know, I read many, many books, you know, sometimes some economist book, which is a Daniel Kahneman book, which came out a few years ago. He's a psychologist, but he won the Nobel Prize in economics, showing the importance of psychology impact. Robert Shiller of the Case-Shiller Price Index. He also is, you know, looking into some of the psychology aspect of it. But the two recent book that I read, contrasting book, if for any people in sort of political inclination, I think it will be good.

One is J.D. Vance, Hibberly Elegy, just showing the life, there's some humors into it. And the other book is by Professor Snyder, Timothy Snyder of Yale University, where he wrote a book called On Freedom. And it's complete contrast. On Freedom, you would read that book and say, wow, after reading the book, if one believes 100%, you would essentially say the Democratic Party is the way to the future.

If you read J.D. Vance book, and especially what is recent commentary, you say, well, J.D. Vance, that is the future of America. Two constant contrasting way, but it's very interesting to know the diverging perspectives. Well, that was tons and tons of wisdom.

Thank you so much, Dr. Lawrence, and I appreciate your time. Thank you for having me. And that's it for today's episode. If you enjoyed this conversation with Dr.

Lawrence, I loved every second of it, and I wish we had more time. Be sure to subscribe to the Title Agents Podcast so you never miss an update. And if you got value from today's discussion, we'd love if you could take a moment to leave us a five-star review on YouTube or your favorite podcast platform. It really helps us reach more listeners like you. Thanks for tuning in, and we'll see you next time.

And that's a wrap on today's journey with Mo Shamil from the Title Agents Podcast, reminding you that mastering the art of innovation is key in the title industry's fast-paced world. If you're finding it tough to keep up with the changes and challenges, remember, you're not alone. Our calendar is open for you. Find the link in the show notes and let's connect. Make sure to hit subscribe to not miss out on strategies that elevate and insights that empower.

Together, we'll navigate the future of the industry. I look forward to our next meeting in the upcoming episode.