Dr. Lawrence Yun, chief economist at the National Association of Realtors (NAR), told an audience of mortgage brokers earlier this month that he expects a 14% year-over-year increase in home sales in 2026. That would be a significant turnaround in the housing market.
He acknowledged that, when previously announced, his forecast had been met with skepticism in some circles. But he insisted that such an increase would be in line with typical post-downturn recoveries. "When the housing market begins to recover after a downturn, getting a double-digit percentage recovery is quite common," Yun told his audience.
A Severe Downturn From 2021-2025
And we have had quite a downturn. "The number of U.S. home sales in the United States declined in 2024, after soaring in 2021. A total of four million transactions of existing homes, including single-family, condo, and co-ops, were completed in 2024, down from 6.12 million in 2021," reports Statista.
Meanwhile, 2025 brought a 4.4% year-over-year decrease in existing-home sales, according to the NAR.
If Yun's forecast proves correct, we could be at the start of a significant and sustained housing market recovery.
Why the Recent Downturn?
Yun put the blame for the downturn squarely on interest costs. These were below 3% in the summer of 2021 but peaked at close to 8% by November 2023, according to Freddie Mac's 10-year chart of weekly average mortgage rates.
That sharp rise delivered a double whammy to the housing market. First, it hit prospective first-time buyers, who laid their purchase plans when homebuying was much more affordable. And secondly, it disincentivized existing homeowners who had ultra-low mortgage rates from selling their homes. Who wants to move when their monthly payments would skyrocket?
Capital Gains Tax Also Slowed Existing Home Sales
Another factor that Yun identified was the capital gains tax that many homeowners have to pay when selling their properties. Presently, single tax filers can exempt $250,000 in capital gains tax (CGT) when they sell their primary residence. For married couples filling jointly, that exemption raises to $500,000. But those figures haven’t increased since 1997.
The median sales price of homes in the last quarter of 1997 was $144,200, according to the Federal Reserve Bank of St. Louis. In the last quarter of 2025, it was $405,300. So, a tax that was intended for mansion owners now milks couples with pretty average homes and single people with sub-average properties in many housing markets.
And that is another disincentive for existing homeowners to move. Legislators in the U.S. Congress have said they're interested in increasing the existing CGT exemptions or eliminating the tax from sales of primary residences altogether.
Might We Be In for a Housing Crash?
Yun dismisses doomsayers who suggest we're lined up for a crash in the housing market. He says conditions today are very different indeed from those before the last crash in 2008.
"About 2% of all home sales currently are distressed property sales," he told the assembled brokers. "During the foreclosure crisis in 2010, one-third of the property transactions were distressed property sales."
Nothing Is Certain
Few economists who specialize in real estate have had such long and distinguished careers as Yun. But that doesn't mean his forecasts are always right. It just means he's more likely to make correct forecasts than many others. At the end of the day, it will be interesting to see what unfolds in the housing market as we proceed further into 2026.
