The current housing market presents unique challenges for real estate professionals. But despite a less than ideal rate environment and relatively low inventory, there are plenty of reasons to be optimistic about what lies ahead.

National Association of Realtors (NAR) Deputy Chief Economist Jessica Lautz offered a straight-forward, data-driven outlook on what the industry should keep in mind during a relatively turbulent time to be in the business of selling homes, during October Research’s 2025 National Settlement Services Summit.

Lautz did not shy away from the hard truths while describing useful strategies for navigating current market conditions by leveraging local data and market trends.

“As we look at the real estate to market today, when we look at it, it really is A Tale of Two Cities,” she said. “We have an all-time high of all cash homebuyers at the same time, we have an all-time low of first-time homebuyers in the market.”

The biggest impediment to first-time homebuyers has continued to be home prices, which are also at an all-time high, on an inflation-adjusted basis, while home sales are at their lowest point since 1995.

Additionally, the median age of first-time homebuyers is 10 years older (38-years-old vs. 28-years-old) compared to four decades ago. This can be attributed to higher income requirements and limited down payment options compared to previous generations.

“That means, for that individual, that’s 10 years of lost housing wealth gains and we know how important that is to current homeowners,” Lautz said. “We also know that perhaps that’s one less move they will have in their lifetime, so they’re not necessarily going to need to move out from that tiny condo in a city center into a single-family home. If you’re 38, you’re probably pretty well entrenched with where your family is at, you’re getting into the peak of your career. You probably know where you want to live, so that’s probably a move that you won’t have.”

An uptick in median household income among first-time homebuyers in recent years signals to economists that there is a shift among this market segment as many people in several career fields are being priced out of the homebuying arena.

“When we look at that median going up to that rate, that we’ve removed from the home buying sector, first responders, teachers, from the home buying market, we’ve changed who the first-time homebuyers are, and that dynamic has changed,” Lautz said.

Housing inventory for existing homes was up 20 percent year-over-year in 2024. However, when one considers the number of units actually available, the data suggest inventory levels are still lower than February 2020 — right before the pandemic coupled with major reductions in interest rates caused a flood of consumers to enter the market looking for a new primary home or, in some cases, a second home.

“At the exact same time, people reimagined how they wanted to live. They reprioritized their life. They made moves across the country,” Lautz said. “Our immigration flow happened in a way that we hadn’t seen in decades, really. And at the same time, home builders said, ‘We have problems. We can't find labor. We can’t get the paperwork through our offices. We don’t have supplies to actually build these homes.’ And so, we saw a continual problem when we looked at inventory, and that dropped us to historic lows.”

Lautz said NAR is expecting a slight decline in mortgage rates in the months ahead but emphasized that it likely won’t be by much. In the meantime, the organization does not expect home prices to start coming down anytime soon.

She cautioned against using historically high interest rates as a benchmark for measuring current market conditions, noting that rates once reached as high as 18 percent. The current interest rate climate has remained relatively flat for several months, hovering just below 7 percent. In this environment, even slight changes can have significant effects on affordability.

While many younger homebuyers are struggling, Baby Boomers are very active in the housing market. About 40 percent are purchasing homes through all-cash transactions, compared to only 10 percent of first-time homebuyers.

“As we look at that, the question becomes, ‘How are these first-time homebuyers pulling that cash together to do that?” Lautz said. “As we dig into the data, the No. 1 source is savings. They’re just putting it away on a monthly basis. Well, that’s not realistic for a lot of people.”

The second most common source first-time homebuyers use to fund an all-cash transaction source is the “Bank of Mom and Dad,” Lautz said, adding jokingly that this often comes with great loan terms for those with the option.

“The third one that we are seeing, and this is quite unusual in the housing market is financial assets,” she said. “We’re seeing that people are taking financial assets, such as stocks or even cryptocurrency, and they’re using that for their down payment or paying all cash for their home. This speaks to a different type of first-time homebuyer who’s able to enter into the housing market and really be successful in the housing market, compete on the limited inventory and then put down an all-cash offer or a higher down payment that you see.”

The fourth common way first-time buyers fund all-cash transactions is with inheritances, which Lautz said are starting to play a growing role in the housing market among millennials and Gen Xers with access to inherited wealth.  

When it comes to affordability, recent data conflicts with some conventional wisdom that would have many people speculate that new homes would be priced higher than existing ones. However, available data suggest prices for new homes and existing homes are virtually neck-and-neck.

Part of the reason for this is that builders have begun going smaller with many new builds, as opposed to the “McMansions” that were prevalent in the 1990s and early 2000s. Meanwhile, existing homes have seen an uptick in demand which has boosted their sales values to price points in the luxury range, depending on location and condition.

With home equity up more than 50 percent in all states, it is a good time to be a homeowner. Homeowners in Florida, Montana and Idaho have all seen home prices appreciate by 69 percent since 2019, with Maine leading all states at 75 percent.

Video of the session is also available here.