Home Equity Discussions May Motivate Customers

CHICAGO — As the spring homebuying season kicks in, there’s a powerful message real estate professionals can share to motivate buyers and sellers alike: Real estate has never been worth more – and you don’t want to miss your piece of the pie.

Home equity is soaring at historic levels as housing prices consistently reach new highs. (The median existing-home price last month hit $398,400 – a record for the month of February according to National Association of Realtors® (NAR) data. Home sellers stand to gain a major financial windfall at resale, and buyers have an opportunity to build wealth in the fast lane.

That’s one way to interpret NAR Chief Economist Lawrence Yun’s market outlook, which he delivered during the association’s quarterly Real Estate Summit. Yun said he expects a 3% gain in home prices this year and a 4% hike in 2026 due to persistent housing shortages.

In the last five years alone, home prices nationwide have risen 47%, NAR data shows. Some states have seen even higher increases in that time:

Maine: home prices up 73%

Florida: up 71%

Montana: up 69%

Vermont: up 68%

New Hampshire: up 68%

“There may be some cracks in the economy, but still providing solid support for the economy is housing wealth,” Yun said, adding that rising home equity buoys household budgets at a time of inflation and escalating consumer costs.

As NAR’s latest existing home sales report showed, each one percentage point gain in home prices translates to about a $350 billion increase in housing equity for American property owners. “That means a gain of nearly $1.3 trillion in home value appreciation at a time when the stock market is undergoing a correction,” Yun said.

That, too, is another talking point: Real estate is a much more stable investment for the long haul.

Yun suggested real estate pros share with their clients the disparity in median net worth between owners and renters – a gap that is rising. Yun shared his projections for 2025, given the latest home price increases.

Homeowner’s median net worth (2025 estimate): $430,000

Renter’s median net worth (2025 estimate): $10,000

“It’s very clear: To build wealth, you need to become a homeowner,” Yun said.

Waiting for home buyers to rush in

Home sales last year sank to 30-year lows, but Yun predicted a sizable uptick in home sales for 2025 and 2026 – 6% and 11%, respectively. Yun said three main factors drive home sales: job growth, low mortgage rates and housing inventory.

“I think we will see sizable pent-up demand if conditions are right,” Yun said, adding that the market appears to be “turning a corner.” He said housing inventory is improving – there were 17% more listings in February than a year earlier – and job growth remains strong. But mortgage rates may be the missing piece to Yun’s formula.

“If mortgage rates come down, it could be a huge boost to potential buyer demand,” Yun said. Mortgage rates have remained in the mid- to high-6% range for weeks. But homeowners who locked in rates in the 2% to 3% range five years ago may be reluctant to give them up.

Yun noted that about 44 million homeowners currently have a mortgage rate under 6%, and 11.6 million have one under 3%. That said, 35.2 million homeowners own their home outright and are mortgage-free. But 9 million have a mortgage rate above 6%. “They’re not locked in; they could move at any time,” Yun said.

Life events, such as marriage, starting a family, death and divorce, could put greater pressure on stubborn homeowners to move, Yun said. He added that mortgage rates could ease slightly this year, averaging 6.4% for 2025, which would bring some relief for buyers. But he said he doesn’t anticipate significant percentage drops, absent any reduction in the national debt or inflation.

Home buyers may need to adapt to rates in the 6% range, and sellers may leverage the equity in their current home for their next purchase. Cash buyers remain a sizable share of the market, comprising about a third of existing-home sales in February, according to NAR.

Housing forecast: The worst is over

“The worst of the inventory shortage is over,” Yun said. “The chances of a recession are slim. Job additions continue. All the factors driving home sales are moving positively. Real estate professionals should expect more business opportunities this year.”

Below is NAR’s recent housing forecast, released during Friday’s summit.

2025

Existing-home sales: +6%

New-home sales: +10%

Median home price: +3%

Mortgage rate: 6.4%

Job gains: 1.6 million

2026

Existing-home sales: +11%

New-home sales: +5%

Median home price: +4%

Mortgage rate: 6.1%

Job gains: 2.4 million

© 2025 National Association of Realtors®