Real Estate Market Outlook with National Association of Realtors^® Chief Economist Lawrence Yun

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Slide. Wednesdays with Woodward (registered trademark) Webinar Series.

The title slide appears on a laptop screen. Text: Wednesdays with Woodward (registered trademark) Webinar Series. Travelers Institute, Travelers. The laptop rests on a desk with a potted plant and mug, with an umbrella logo. A presenter's video feed sits in the upper right corner, labeled Joan Woodward. Joan wears formal clothes, sitting in an office with a microphone.

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JOAN: Hi there, everyone. Good afternoon. And thank you so much for joining us. I'm Joan Woodward, President of the Travelers Institute, which is our public policy division and educational arm of Travelers. Welcome to, once again, Wednesdays with Woodward.

Before we get started, I'd like to share our disclaimer about today's program.

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Slide. Text: About Travelers Institute (registered trademark) Webinars. The Wednesdays with Woodward (registered trademark) educational webinar series is presented by the Travelers Institute, the public policy division of Travelers. This program is offered for informational and educational purposes only. You should consult with your financial, legal, insurance or other advisors about any practices suggested by this program. Please note that this session is being recorded and may be used as Travelers deems appropriate. Travelers Institute, Travelers.

Slide. Wednesdays with Woodward (registered trademark) Webinar Series. Real Estate Market Outlook with National Association of Realtors (registered trademark) Chief Economist Lawrence Yun. Logos appear for: Travelers Institute, Master’s in Financial Technology (FinTech) Program at the University of Connecticut School of Business, C.B.I.A., University of South Carolina Darla Moore School of Business, Metro Hartford Alliance, American Property Casualty Insurance Association (service mark).

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So, I'd also like to thank our webinar partners today, the Connecticut Business & Industry Association, the Master's in FinTech Program at UConn, the MetroHartford Alliance, the Risk and Uncertainty Center of Management at the University of South Carolina, and the American Property and Casualty Insurance Association.

So let's get started, folks. Today, we're going to tackle one of our most requested topics. Yes, I read all the surveys, so make sure you fill out today's survey. The survey showed that the real estate market, both commercial and personal, was one of our hottest topics of 2025.

So to kick off 2026, we're bringing this to you today. The residential real estate market has been strained over the past couple of years by higher prices, lower inventory and, of course, higher mortgage interest rates. The commercial market has also had its own challenges.

We want to know, where is this real estate market headed? And what does it signal for the broader economy? 

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Slide. Wednesdays with Woodward (registered trademark) Webinar Series. Today's Speaker, Lawrence Yun, Chief Economist, National Association of Realtors (registered trademark). Travelers Institute, Travelers.

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I'm thrilled to, once again, bring back our friend, the National Association of Realtors Chief Economist Lawrence Yun. It’s his third time with us. I'm very grateful to have his wisdom and insights to share today.

In addition to his role as the lead economist, Lawrence oversees the Research group at the National Association of Realtors. He supervises and is responsible for a wide range of research activities, including the NAR Existing Home Sales stats, the Affordability Index, which obviously, is a hot topic today, and the Home Buyers and Sellers Profile Report.

He regularly provides commentary on real estate market trends to its nearly 1.5 million Realtors. I might also note that he's very active on LinkedIn, as am I. If you're not following Lawrence, you should. I follow his every post, try not to miss any because his insights are so terrific.

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Two video feeds fill the screen. Joan Woodward on the left and Lawrence Yun on the right. Lawrence wears a dark suit and tie, with glasses.

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So Lawrence, thank you so much for joining me today. It's really terrific to have you back on. I'm going to give you the floor for about a half an hour. And then I'll come back on with all my audience questions. So folks, put that question you have in the Q&A. And we'll try to get to as many as we can. Lawrence, take it away.

LAWRENCE YUN: Great, hello, everyone. Thank you, Joan, for inviting me again. So happy to share my thoughts on real estate. And exactly, Joan, as you indicated, real estate is going through some challenges in terms of transaction activity. Commercial real estate has seen some values decline. But at the same time, homeowners across the country, they are doing very well. They have seen their home values rise 50% over the past five years. So they are doing very well.

I am in Washington. Realtors are also very engaged with some policymakers talking with their elected representative. And I will talk about one major issue that we want to push through this year. Hopefully, this policy change could have quite a reviving impact on the real estate.

So let me talk about all this, put the PowerPoint slide onto the screen, and then we will go from there.

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Slide. Lawrence's video sits in the upper right corner. Text: Real Estate and Economic Outlook. Lawrence Yun, Ph.D., Chief Economist, National Association of Realtors (registered trademark). Logo: National Association of Realtors, registered trademark.

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Some slides I will briefly touch upon because I think Q&A itself will be very interesting. But for completeness, I did have the full slide deck with me.

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Slide. Text: Headed to Economic Recession? No data to confirm during the Government Shutdown. Near Record Stock Market Wealth but overvalued? Near Record Housing Wealth (appears on solid ground). Job Gains were weakening. Consumers not happy. Consumers are defaulting on loans. 

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So let's first start with the very big picture. Aside from the real estate, I think there's a question about whether or not we are going into an economic recession. The Atlanta Federal Reserve Bank, which tracks GDP number for the upcoming quarter, is implying that we are not anywhere near recession. In fact, the next quarter GDP reading could be in the 4%, 5% condition.

But there are some worrying signs that is developing. And I think it is worth mentioning. First, we know that we had the longest government shutdown back in September, October of last year. And during that time period, some government data is not available. So we'll try to decipher exactly what's going on in the economy.

But I bring this topic because at the end of this month, we may have another government shutdown unless a-- legislation is passed. And given the bickering and all the nasty comments thrown at each other between Democrats and Republicans, averting government shutdown is not a sure thing.

Related to the real estate, flood insurance is not available. So some mortgages are not originated. Some of the rural community, which depend upon USDA to get a mortgage to buy a home, zero down payment, that would not be available. Or income verification from IRS, well IRS, they're not answering the phone call during the shutdown. So we hope it doesn't happen. But let's keep in mind, it could happen again at the end of the month.

Stock market, a little wobbly today. But if you look at over the past five years, near record high condition. But there are a lot of question about whether it is overvalued and whether or not we will see a correction. Now, housing value appears to be on much solid ground, at least on a national aggregate basis.

We are seeing some price decline, I would say, temporary price decline in some markets, Florida, Texas, where they had robust new supply coming in, very active construction in the past few years. So they have to work off some of those excess inventory.

Job gains, clearly weakening. Consumers are expressing unhappiness about the economy. And on some borrowed money, they're beginning to default. So there are some concern related to the economy.

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Slide. A bar graph is named "Stock Market, S and P 500 Index." It shows data from January 2000 to January 2025. The trend line shows overall growth with some fluctuations. It begins around 1,500 points in 2000, experiences dips around 2003 and 2009, then steadily climbs to nearly 7,000 points by 2025. Text: Source, Standard and Poor's. 

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So let's first look at the stock market. Just went up way, way up there. This is a Standard & Poor's 500 Index. But if you look at what really drove up the number in the past five years, it's really about a dozen companies. It is not 500 companies. It's really 12 companies with some exposure to artificial intelligence, whether it is NVIDIA computer chip, they're trying to produce some data centers.

Or the usual tech titans, Amazon, Microsoft, Google, Facebook and such, so they are investing heavily in artificial intelligence. Artificial intelligence will be with us for consumer usage. But the question is, can they turn a profit, big, big profit? So the number here shows that the valuation appears high.

And if there is a correction, based on my conversation with some Wall Street analysts and other economists, no one would be surprised if there is a correction. But I don't know whether we will have a correction or whether this is properly justified, but I think it is worth considering that if there is a correction, usually that is a early sign that the economy could truly slow down and go into a recession.

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Slide. A line graph is named "Consumer Sentiment, Overall Index." The line displays data from January 2000 to January 2025, starting at around 115, with fluctuations, ending around 50. Text: Source, University of Michigan. 

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Consumer Sentiment Index, well, according to University of Michigan, which they surveyed nationwide, as you can see, the number recently is not good. What is surprising about this figure is that it is even below what it was 15 years ago in 2010 foreclosure crisis.

We don't have foreclosure crisis today. We don't have a recession or 8 million job losses. But consumers are expressing displeasure about the direction of the economy, their finances. So interesting that the index number is way, way down, even below what it was in 2010 foreclosure crisis.

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Slide. A line graph is titled Consumer Sentiment about Future and Present. The same graph appears, displaying data from January 2000 to January 2025 in green, like the word Future, starting at around 115, with fluctuations, ending around 50. A line appears in red, like the word "Present," displaying very similar data, averaging about 10 data points lower. As the data draws toward 2025, the lines converge. Text: Source, University of Michigan. 

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Now, if you open the hood on this index, it is comprised of two components, green, which looks at the future expectation, and the red, essentially consumers responding to current situation. If you don't have a job, is it hard to find a job? How are your current finances? Questions like that. While the green is asking about the future expectation.

Now this graph, trend line is exactly the same as the previous chart. But what surprised me on this chart is the following, Americans are optimists. Even if today is difficult, at least they are willing to wake up to say that tomorrow will be better. Green line is always above the red line.

Look what's happening in the past four years, three, four years, I don't know whether this is due to the cable news channels just saying the other political party is evil. And then as a result of so much discussion, nasty discussion in politics, whether people really don't have a good outlook about the future.

So from my perspective, somewhat interesting that the green line is no longer above the red line, as happened in the past. So somehow, Americans not looking the future as a bright condition. The New York City mayor's race or Seattle mayor's race may have surprised many people.

Ten years ago, who would have thought a socialist, declared socialist would easily win the New York City mayor's race? Maybe there are certain segment of society who are completely unhappy, they're willing to try anything. So maybe the election result, perhaps, is not surprising given the Sentiment Index that you see here, especially regarding the future, or lack of future prospects condition.

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Slide. A line graph is titled "Auto Loan, 90-plus Days Delinquency." The graph displays auto loan delinquency rates over 90 days from 2000 to 2025. A pink line shows fluctuations, with notable peaks around 2010 and 2020. The y-axis ranges from 0 to 6 percent, while the x-axis marks years in 5-year intervals. The trend generally increases over time. Text: Source, Federal Reserve Bank of New York. 

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Now, aside from how consumers are feeling and the expression of sentiment, we're really seeing in economic decisions. Some people are unable to pay auto loan back. So we are seeing rising auto loan default rate.

You see three humps, first hump, 15 years ago, foreclosure crisis, second hump, the COVID lockdown. Well, third hump, stock market, all-time high, housing wealth, all-time high, job situation, we are not in a recession. Yet this data is implying we are as if we are in a recession. So concerning figure.

Credit card delinquency, also rising. President Trump has introduced a lot of debate within the Republican Party. Should the credit card companies cap their interest payment at 10% for one-year time period? Or is that intervening in the corporate world or private property? So the credit card delinquency beginning to rise.

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Slide. A line graph is titled "Student Debt, 90-plus Days Delinquency." The graph displays rates over 90 days from 2003 to 2025. A pink line shows fluctuations, starting at 6.0 in 2003, increasing in 2013, drastically dropping below 1.0 in 2023, before rising to 10.0 in 2025. Text: Source, Federal Reserve Bank of New York. 

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Student debt, for a couple of years during COVID, part of the stimulus, you don't have to repay the student debt. So technically, the default rates were zero. Well, now, people have to repay. And look what is happening. People with student debt are unable to repay.

So definitely, certain segment of the society feeling economic distress. And probably, the same people are expressing economic unhappiness, low figure in the consumer sentiment.

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Slide. A line graph is titled "To Avert Economic Stress, Fed Funds Rate getting Cut, blue." A blue line traces data from about 1.5 in January 2020, dropping sharply to 0.0 until 2022, then rising to 5.0 in 2023, at which point it slowly declines. An arrow indicates a continued downward trend. Text: Source, Federal Reserve and Freddie Mac Mortgage Rate. 

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And partly as a result of that, to avert economic distress, Federal Reserve has begun to cut interest rate.

September, October, December of last year and probably three more times, in my opinion, this year. So Federal Reserve trying to avert those economic stress. Now of course, Federal Reserve is focused more on the job market compared to say, credit card delinquency rate. But nonetheless, everything could be connected. So Federal Reserve trying to prevent further economic distress and ready to cut interest rate.

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Slide. Title: Impact to Mortgage Rates. Text: Federal Reserve Rate Cut (on fed funds short-term rate). Federal Deficit and National Debt. Supreme Court on Trump Tariffs ($3 trillion revenue over decade). Inflation Rate. Quantitative Tightening, net sale of mortgage-backed securities by the Fed. Government guarantee (or non-guarantee) on mortgages. Spread between 30-year Mortgage and 10-year Treasury. Stock Market Crash.

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But the mortgage rate, when I speak with my Realtor audience, they often say, why come mortgage rates do not follow Federal Reserve fed funds rate? Because two are different interest rate. One is short term, very short-term interest rate, fed funds rate. While the mortgage rate is much more longer term and is determined by many, many factors.

Everyone is focused on the first bullet point, Federal Reserve rate cut. But that is only one of the factors impacting mortgage rate. Federal deficit, large deficit, large government borrowing, less mortgage money available. Supreme Court will soon determine the constitutionality of President Trump's tariffs, whether the White House can make that move alone, or whether or not it requires congressional legislation.

One interesting part, I am in Washington. And in Washington, language is always a 10-year cycle, decade. So tariff is anticipated to bring in about $3 trillion in revenue. So if this is declared unconstitutional, we may have sudden blooming of budget. And budget deficit is already high, but we may get additional budget deficit increase from it, which means that it will put upward pressure on mortgage rates.

Inflation rate, quantitative tightening, usually done by the Federal Reserve. But two weeks ago, White House instructed Fannie Mae, Freddie Mac, which are effectively owned by the government, to say, go buy government mortgage-backed securities, go buy mortgage bonds. And it brought the mortgage rate, two weeks ago, to three-year low levels, 5.99%.

So it is possible, outside of the Federal Reserve, mortgage rate could be impacted. Whether or not Fannie and Freddie, once they come out of the conservatorship, whether it would have government guarantee. So anyway, many, many other factors would impact mortgage rate. Everyone is too focused on the first bullet point. So mortgage rate determined not only by the Fed policy, but many, many other factors.

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Slide. A line graph is titled Mortgage Rate, red, Fed Funds Rate getting Cut, blue. The graph displays two lines representing mortgage rates and fed funds rates from 2020 to 2026. The red line, indicating mortgage rates, shows an increase from 2022 to 2024, followed by a slight decline. The blue line, representing fed funds rates, mirrors this trend but projects a steeper decrease toward 2026, indicated by a downward-pointing arrow. Text: Source, Federal Reserve and Freddie Mac Mortgage Rate. 

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But nonetheless, the reason why people are focused on the Federal Reserve policy is the blue line, Fed policy, the red line, mortgage rate. Even though it is not a one-to-one relationship, especially on the day that Federal Reserve cuts interest rate, mortgage rates tend to rise. So it's never one-to-one relationship.

But as you can see on the chart, over a longer-term period, it does tend to move similarly. Maybe not in the same metric, same percentage points. But at least directionally, it moves similarly. So with three more rate cuts on the way, in my view, I think the mortgage rate can go down towards 6%, or even slightly under 6%. And that will be very huge help to the real estate market.

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Slide. Title: Consumer Price Inflation at 2.7% in November, But still above 2% Target. The graph displays consumer price inflation from January 2019 to November 2025. A blue line shows fluctuations in inflation rates, peaking around 9% in early 2022 before declining. A red horizontal line indicates the 2% target. Text. Source, B.L.S., missing data in October is assumed as midpoint rate of September and November. 

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But let's keep in mind, the inflation is not under control. Gas prices are a little cheaper, but you go to grocery store, things are not cheaper. You look at everything, and inflation rate is still running above 2%.

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Slide. A line graph is titled Housing Shelter Cost Rising at 3.0%, Decelerating. Renters' Rent, blue, and Owners' Equivalency Rent, Red. A line graph displays percentage changes from a year ago over time, spanning from January 2019 to January 2025. Two lines, one red and one blue, track closely together, showing similar trends. Both lines peak around January 2023 at about 8 to 9% before declining. A green arrow points downward at the end, indicating a projected decrease. Source, B.L.S., missing data in October is assumed as midpoint rate of September and November. 

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And one thing that is helping drive down inflation is that we are no longer seeing inflationary pressure on the housing, whether renters’ rent or owners’ equivalency rent, I think we will continue to see deceleration. So this will help inflation numbers down, giving a little more comfort for the Federal Reserve to cut interest rate, knowing that the future inflation number could be a much softer, much more manageable. But one component that is not behaving is insurance.

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Slide. A line graph is titled Home Insurance Cost Rising at 7%, Tenants' and Household Insurance. The graph displays percentage changes from a year ago over time, spanning from January 2019 to January 2025. The line fluctuates, starting near 2% and dropping below 0% in early 2022. It then rises steadily, reaching peaks above 4% in 2024 before climbing sharply to almost 8% by January 2025. Source, B.L.S., missing data in October is assumed as midpoint rate of September and November. 

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So the renters insurance, homeowner property insurance rate, according to the BLS, is rising, not contained. So this is one component that is still causing a little headache on the inflation number and definitely causing headache for homeowners or potential buyers because insurance rates have been rising. And in some areas exposed to the big disaster events, wildfires and such, I'm hearing in California mountains, where insurance is not available.

So they are still willing to buy somehow, even without getting a mortgage, self-insuring. But that's not the way to go. I mean, we want to make sure that any major purchase, people should have access to insurance, proper actuarial value, so that insurance companies do not go bankrupt. We need to make sure that all private companies have a right to earn a living, a right to be in their private decision-making.

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Slide. A line graph is titled Gold Price Reflecting Permanently Higher Inflation? A line graph displays the trend of a financial metric over time, spanning from January 2000 to January 2026. The orange line starts around $500 and remains relatively stable until 2006. It then shows gradual growth with some fluctuations until 2020, after which it experiences a sharp upward trajectory, reaching approximately $4,500 by the end of the graph. Text: Source, Wall Street Journal, price per troy ounce. 

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Now, gold prices have skyrocketed, skyrocketed. I think a lot of global uncertainty is one component, but also it's a good inflation hedge. And with the Federal Reserve cutting interest rate at a time when inflation is not fully under control, some people are questioning whether it will lead to permanently higher inflation.

The gold necklace that your grandmother is keeping on the drawer, well, that is very expensive. Tell her, don't take that to the pawn shop. Pawn shop will offer very low price. According to the market, price of gold has risen so much.

Now, I bring this in connection with real estate. Because historically, throughout human history, we have found that real estate is also a very good hedge against inflation. Real estate prices will not go like this. But I bring this topic because in the social media, there's so much discussion about home prices will crash 30%. Don't buy houses today. Wait, wait, wait until prices crash.

Well, counterargument to that is show this chart. With gold prices rising in such a way, surely, real estate prices cannot crash 30% when real estate also has that component of inflation hedge properties.

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Slide. A bar chart is titled Total Payroll Jobs to December 2025, plus 7.3 million More Jobs from Pre-COVID Highs. A line graph displays an upward trend in millions from January 2020 to January 2026. The values start around 150 million in early 2020, dips to 130, then steadily increase to approximately 160 million by 2026. The graph shows consistent growth over the six-year period with minor fluctuations. Text: Source, B.L.S.. 

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Now, let me turn quickly to the job market, because the Federal Reserve is also commenting the weakness in the job market.

So, how many paychecks are being issued in America? Right before COVID, so you see January 2020, then the COVID disruption, then the reopening of the economy, more jobs, more jobs. So we have 7 million more jobs, essentially record high condition.

So you may be wondering, well, why come home sales are not at an all-time high when employment is high? Because mortgage rate is much higher, affordability challenges, lack of inventory. So housing market is not only driven by jobs, but mortgage rate, inventory availability, affordability condition.

But at least people can view this as a potential housing demand. Because I think the American dream still consists of owning a property. So if the conditions develop better, lower mortgage rates, better affordability and more inventory, I think the home sales will clearly revive from this.

So the question on this graph is, why is the Federal Reserve cutting interest rate with the weakness in the job? Because you don't really see it here. I will put the same data slightly differently.

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Slide. A bar graph is titled Monthly Net Job Changes, circling near zero net in recent months. Data from January 2021 to January 2026 appears, with the y-axis depicting values in thousands. Several bars in 2021 and 2022 hover around 800, trending toward a decline. A few bars in late 2025 and 2026 dip below the x-axis, to negative 200. Text. Source, B.L.S.. 

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And this is job addition each month.

So as you can see, the job addition each month, especially in recent months, has been near zero. Some months positive, some months negative. And Federal Reserve does not want to see this number consistently turn negative or deeply negative. And to be ahead of that, cutting interest rate, cutting interest rate, cutting interest rate.

But the gold prices are rising. And real estate, well, is an inflation hedge. I don't think it will go up like the gold price is, but at least it's implying 30% price crash in real estate, certainly not a condition.

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Slide. A line graph is titled: Federal Government Jobs, tumbling down, 268,000 fewer from peak in December 2024. A line graph displays data over a 6-year period from January 2020 to January 2026. The y-axis shows values in thousands, ranging from 2000 to 2500. The line trends upward gradually until just before January 2025, reaching a peak around 2400. It then drops sharply to about 2150 in January 2026. Text. Source, B.L.S.. 

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Now, one component of the weakness in the job market is this time one year ago, January of 2025, Elon Musk came to Washington. And we know what he did.

He essentially believes in his view, there's so much fraud in government spending, so much wasteful spending, let's slash it away. So this is the number of federal government employees. I'm in Washington, and I have seen many, many people who took early retirement, their last paycheck being the end of September of last year, so a large decline.

But we also know private sector is also cautious. FedEx laying off workers. Many of the banks saying we're not going to hire people this year. So we know that private sector is also showing softness in addition to the government.

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Slide. A line graph is titled Unemployment Rate of 4.4% as of December. The line graph displays percentage values over time from January 2000 to January 2025. The line shows fluctuations, with a notable peak around January 2010 reaching about 10%. A sharp spike occurs in early 2020, reaching approximately 15%, followed by a rapid decline. The graph ends with values around 5%. Text. Source, B.L.S., October data missing but imputed as average of September and November. 

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But the unemployment rate still appears to be very manageable and nothing alarming, not like, say, 15 years ago during Great Recession, 10% unemployment. Or during COVID lockdown, 15% unemployment. Today, unemployment would be considered very, very normal, nothing alarming.

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Slide. A line graph is titled: Wage Rate Rising at 3.8%, blue, faster than consumer prices at 2.7%, red, in November. A line graph displays percentage changes from January 2019 to January 2026. Two lines, one blue and one red, show fluctuating trends. The blue line remains more stable, with one spike down in early 2021, while the red line exhibits greater volatility, peaking around January 2022 before declining sharply. Both lines converge towards the end of the graph. Text: Source, N.A.R. calculation of B.L.S. data. 

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Now, among the people who are getting jobs and getting salaries, their wage rate is slightly above consumer price inflation. So standard of living modestly, by small hair, there is standard of living beginning to improve on average conditions.

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Slide. A table is titled Hourly Wage Rate. The data columns are labeled Industry, December 2025, December 2019, and Percent Growth from 6 years ago. The rows are: All Workers, $37.02, $28.38, and 30.4%. Leisure and Hospitality, $23.28, $16.76, and 38.9%. Construction, $40.37, $31.19, and 29.4%. Text: Source, N.A.R. analysis of B.L.S. data. 

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Now, one thing that I will be monitoring going forward is the following, what's going to happen to the wage rate in the leisure and hospitality and in construction? I bring this two sector because people working at the hotel cleaning, or dishwashing, or working in the construction, many people say they're undocumented workers.

I don't know the exact figure of it, but to the degree that southern border is completely shut down, I wonder whether or not we will see bigger wage boost in these sectors and what that means for the companies operating it condition.

Now, vice president has publicly commented to say, look, I want Americans to work in the hotels. I want Americans to work in the construction. So maybe the higher wages will go to Americans. But what happens on the price, final consumer prices condition? But worth monitoring given that southern border is effectively completely shut down.

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Slide. A map of the United States is titled One-year Payroll Job Gain, percent change November 2024 to November 2025. A map of the United States displays percentage values for each state. Most states are shaded in light blue with positive percentages, while a few states are colored orange with negative percentages, notably Wisconsin, Illinois, and Maine. D.C. is listed in dark red, indicating a negative 4.2 percent change. Text: Source, N.A.R. analysis of B.L.S. data. 

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Now, in the past one year, if you are wondering where there could be economic recession, you are looking at the orange-colored states. So they are not adding jobs. They are losing jobs. But the blue color states are adding jobs, so they are not in an economic recession.

But let me give you a long-term picture.

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A map of the United States is titled Job Gains Since Pre-COVID Record High Payroll Employment, Percent Change from March 2020 to November 2025. A map of the United States displays percentage values for each state. The states are colored in shades of blue and green, with darker hues representing higher percentages, notably Montana, Oklahoma, and Georgia. Only Washington D.C. and Hawaii have negative values: D.C., negative 7.7%, Hawaii, negative 0.4%. Text: Source, U.S. Bureau of Labor Statistics.

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Over a five-year time span, pre-COVID to the most recently available data, every state is adding jobs except for District of Columbia and Hawaii. Every state adding jobs.

In the green color, much faster job creation. Dark blue, above national average. And light blue, essentially below national average. But every state is adding job. But we don't have record high home sales because mortgage rates are high, inventory is not available. But at least the potential housing demand is building, especially in those green-colored states.

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A slide with text briefly appears: Residential Real Estate. Then, slide. A bar chart is titled Existing Home Sales, no change year-to-date to November, Three Subpar Years, 75% of Pre-COVID Activity. A bar graph displays existing-home sales data from 2019 to 2025. The highest bar represents 2021 with over 6 million sales. Sales decline sharply after 2021, with 2023 to 2025 showing around 4 million sales each year. Source, N.A.R.

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Looking at the real estate market, three tough years for Realtors, people in the title insurance, say even for people who are mortgage originators or doing moving truck business. Very difficult three years. It is 75% of normal. Normal meaning 2019 pre-COVID.

We had two years of frenzied activity when interest rates were low. But when the Federal Reserve aggressively raised interest rate, mortgage rate going up to 8%, you see what happened to home sales. But now, with mortgage rate almost at 6%, no longer at 7% or 8%, at 6%, maybe we are ready to turn around in terms of home sales.

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Slide. A bar graph is titled New Home Sales, Back to Pre-COVID Sales Activity. A bar graph displays annual data from 2019 to 2025. The bars, colored in pink, represent values ranging between 600,000 and 800,000. The highest bar appears in 2020, while 2022 shows the lowest value. The graph indicates slight fluctuations over the years with a generally stable trend. Text: Source, Census. 

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Now, the builders are back to pre-COVID because they can create inventory. Maybe they have little oversupply, but at least they are producing so they can at least find buyers or do some mortgage rate buydown incentives.

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Slide. A map of the United States is titled 5-Year Home Price Gains Since Pre-COVID, percent change from 2020, Q1, to 2025, Q2. A map of the United States displays percentage values for each state. States are colored in varying shades of blue and green. Puerto Rico is included as an inset. The percentages range from the low 40s to the low 70s across different states. Text: Source, N.A.R. analysis of F.H.F.A. data.

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For homeowners, they're all smiling. Home prices have risen spectacularly over the past five years. Locate the state of Maine, No. 1 in the country, 80% price increase over the past five years. So very solid gain across the board. But some states truly outperforming compared to others.

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Slide. A bar chart is titled Real Estate Net Worth, Near Record High. The chart displays financial data in trillions of dollars from 2000 to 2025. The trend line begins around $10 trillion in 2000, dips slightly in 2009, then steadily rises to reach approximately $40 trillion by 2025. The x-axis shows years by quarter, while the y-axis ranges from $0 to $45 trillion. Text. Source, Federal Reserve. 

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And consequently, net worth for homeowners at a record high.

But is it a bubble? Well, again, the gold prices. Gold prices are indicating that home prices will not crash.

(DESCRIPTION)
Slide. A line graph is titled Seriously Delinquent Mortgages and Foreclosures, 90-plus days late or in foreclosure. A line graph displays the percentage of mortgages over time from 2000 to 2025. Two lines are shown -- one orange and one red. The orange line consistently remains above the red line. Both lines show significant peaks around 2010, with the orange line reaching nearly 10% while the red line peaks at about 5%. Source: Mortgage Bankers Association. 

(SPEECH)
But here is another indication that home prices will not crash. We don't have those funny, risky subprime lending anymore.

Mortgage origination is people who have the ability to repay mortgages. Consequently, mortgage default rate in yellow, foreclosure rate in red, historically low, very little distressed property. And consequently, don't expect price decline. The question is whether or not housing can be affordable with, say, wage rate consistently outpacing, say, home price growth in the future.

(DESCRIPTION)
Slide. A line graph is titled Light Flashing on Weekly Mortgage Applications to Buy a Home, 4-Week moving average. A line graph displays a downward trend from January 2022 to January 2024, followed by a gradual upward trend until January 2026. The y-axis ranges from 100 to 300, while the x-axis shows dates in three-month intervals. The blue line represents fluctuating values over time. Source: Mortgage Bankers Association.

(SPEECH)
One bright sign on the residential market is mortgage application to buy a home. Now, some are approval, but some are denials as well. But this clearly shows expression of wanting to buy a home. So in 2022, that collapsed when mortgage rate increased.

But look what happened throughout 2025. The expression of wanting to buy a home has been rising. Now, interest rate at near 6%, rather than 7%, I think more people will get approval rather than denial. So this is a very good sign.

(DESCRIPTION)
Slide. A table is titled Nationwide Forecast. Two columns of values are labeled 2025 and 2026. The rows: Existing Home Sales, plus 0%, plus 14%. New Home Sales, minus 2%, plus 5%. Median Home Price, plus 3%, plus 4%. Mortgage Rate, 6.7%, 6.0%. Job Gains, 400,000, not 2 million, 1.3 million, not 2 million. Unemployment Rate, 4.3%, 4.6%, not 5.5%. 

(SPEECH)
And consequently, my forecast on the residential side, before quickly touching on the commercial, is that I think home sales will recover about 14% this year.

New home sales will depend upon builder activity, no price crash. Underlying assumption is mortgage rate hovering near 6%, maybe some weeks, 5.8%, Other times, 6.3%. But essentially, 6% average. Job gains, not spectacular, but no recession.

So still hitting record high. But part of the weakness in the job market, again, federal government slashing. And also we don't have southern border crossing, somehow people crossing the border to say, look, where's my job? So given that, I think the job numbers will be weaker. But note that unemployment rate is really not rising, even with the softer job numbers.

(DESCRIPTION)
Slide. Text: Commercial Real Estate Fundamentals.

(SPEECH)
Quickly going into the commercial market,

(DESCRIPTION)
Slide. A bar chart is titled Apartment Demand, Strong but expect sharp weakening in Class C lower-end, multifamily absorption units 12 months. A bar graph displays annual data from 2019 to 2025. Red bars represent values that fluctuate over the years, starting at 356K in 2019, peaking at 740K in 2021, then declining to a low of 142K in 2022. The values rise again, reaching 549K in 2025 Q1 before slightly decreasing to 506K in 2025 Q3. Text: Source, N.A.R. analysis of CoStar data.

(SPEECH)
the net absorption on apartment has been solid, meaning that with people unable to buy a home, they are seeking out apartment leasing. So apartment leasing activity is good. But the weakening in the Class C low-end, I think this is related to the southern border crossing, no southern border crossing, so demand on the very low-end apartments are not there.

(DESCRIPTION)
Slide. A bar chart is titled Apartment Vacancy Rate High, from overproduction, multifamily vacancy rate. A bar graph displays annual percentage values from 2019 to 2025. The red bars show an overall upward trend, starting at 6.3% in 2019 and reaching 8.3% by 2024. The values fluctuate, with a notable dip around 2021 before rising steadily in subsequent years. Text: Source, N.A.R. analysis of CoStar data.

(SPEECH)
But their vacancy rates are rising, even though demand is there, because there is an overproduction, especially in the Sun Belt states. So much new apartment construction being completed. So oversupply condition. Consequently,

(DESCRIPTION)
Slide. A bar chart is titled Private Sector Data, Apartment Rents Barely rising. Multifamily Rent Growth 12 Months. A bar graph displays percentages over multiple years, spanning from 2019 to 2025. The red bars represent different values, with the highest peaks occurring around 2021-2022 at approximately 9%. The graph shows a general upward trend, followed by a decline toward 2025. Text: Source, N.A.R. analysis of CoStar data.

(SPEECH)
the rents are very, very minimal, which again, I think will help on the consumer price inflation in the future.

(DESCRIPTION)
Slide. A bar chart is titled Office Using Jobs, plus 1 million from pre-COVID, Professional Business Service and Financial Industry. A line graph displays data over time from January 2020 to January 2025. The y-axis shows values in thousands, ranging from 18,000 to 24,000. The line starts around 19,000 in January 2020, rises steadily to about 23,000 by January 2022, and then remains relatively stable until January 2025. Text. Source, B.L.S.. 

(SPEECH)
So the office sector, this is the traditional people who would utilize office, professional business service like accounting, legal service and financial industry. You see the figure much above pre-COVID.

(DESCRIPTION)
Slide. A bar chart is titled Office Net Absorption in past 12 months, Stops Bleeding. Text: Office Absorption 12 Months. A bar graph displays quarterly financial data from 2019 to 2025. Red bars represent positive and negative values, with the highest positive value at 62.9M in Q2 2019. The graph shows a significant dip to negative 127.6M in Q2 2021, followed by a gradual recovery and fluctuations in subsequent quarters. Text: Source, N.A.R. analysis of CoStar data.

(SPEECH)
Yet the demand for office spaces are weak. We all know it, at least we can see it in the data.

(DESCRIPTION)
Slide. A bar chart is titled Office Vacancy Rising, from lack of demand. Office Vacancy Rate. A bar graph displays a steadily increasing trend over time. The x-axis shows quarterly periods from Q3 2019 to Q3 2025, while the y-axis represents percentages ranging from 0% to 16%. Red bars indicate the values, which rise from around 9% in 2019 to approximately 14% by 2025. Text: Source, N.A.R. analysis of CoStar data.

(SPEECH)
And the office vacancy rate still rising, not stabilizing at the moment.

(DESCRIPTION)
Slide. A line graph is titled Retail Sales, in millions of dollars to August 2025. A line graph displays economic data from January 2000 to January 2025. The trend line shows steady growth from around 250,000 to over 700,000, with a sharp drop in early 2020 followed by a rapid recovery. The overall trajectory is upward, despite some fluctuations over the 25-year period. Text: Source, Census. 

(SPEECH)
The retail spending still remains good. I think it's partly because wage rate is outpacing consumer prices. And housing wealth, stock market wealth. So some segment doing well. Other segment, remember consumer sentiment, not doing well.

We may have a classic K-shaped economy, upper end doing well, bottom half expressing great displeasure about the direction of the economy.

(DESCRIPTION)
Slide. A bar chart is titled Retail Vacancy Rate Low, from restrained production, Retail Vacancy Rate. A bar graph displays quarterly unemployment rates from 2019 to 2025. The red bars represent percentages, fluctuating between approximately 4% and 5%. The highest peak occurs in 2020, reaching around 5%, while the lowest points are seen in  2022 through 2024, hovering near 4.1%. Text: Source, N.A.R. analysis of CoStar data.

(SPEECH)
One thing on the retail sector is vacancy rates are low. And it's expected to remain low, just because they have not been adding new supply. So lack of new supply is keeping the vacancy rate very manageable.

(DESCRIPTION)
Slide. A line graph is titled Merchant Wholesaler Sales, in millions of dollars to July 2025. A line graph displays an upward trend from 2000 to 2025. The line begins around 200,000 in 2000, steadily rises to about 500,000 by 2015, then experiences a sharp drop in 2020. It quickly recovers and climbs to nearly 700,000 by 2025, showing overall growth with some fluctuations. Text: Source, Census. 

(SPEECH)
Now, for the warehouse demand, usually bringing by container. But given the tariff situation, a little more uncertainty, we're not seeing a robust growth in the wholesale demand.

(DESCRIPTION)
Slide. A bar chart is titled Industrial Space Net Absorption, Tariff Impact? Industrial Absorption, 12 Months. A bar graph displays revenue figures from 2019 to 2025. The bars, colored red, show fluctuations in revenue over the years. The highest point reaches $534M in 2022, while the lowest is $63M in 2025. The overall trend indicates a decline in revenue from the peak years to recent times. Text: Source, N.A.R. analysis of CoStar data.

(SPEECH)
And therefore, the absorption in the industrial sector appears to be much softer condition.

(DESCRIPTION)
Slide. A bar chart is titled Industrial Vacancy Rate, from overproduction, Industrial Vacancy Rate. A bar graph displays annual percentage values from 2019 to 2025. The red bars show an overall increasing trend, starting at 4.9% in 2019 and reaching 7.5% in 2025. The lowest point is 3.8% in 2022, after which the percentages steadily rise. The graph indicates a consistent upward trajectory in recent years. Text: Source, N.A.R. analysis of CoStar data.

(SPEECH)
And also there is an overproduction, too much construction, and therefore, vacancy rate rising in the industrial sector,

(DESCRIPTION)
Slide. A bar chart is titled Rents Softly Rising, Industrial barely positive, Industrial Rent Growth, 12 Months. A bar graph displays annual percentage values from 2019 to 2025. The percentages start at 5.8% in 2019, rise to a peak of 10.1% in 2021-2023, then gradually decline to 1.4% by 2025. The bars are colored red and show a clear downward trend after the initial peak. Text: Source, N.A.R. analysis of CoStar data.

(SPEECH)
and the rents barely rising.

(DESCRIPTION)
Slide. Text: Commercial Real Estate Loan Distress? 

(SPEECH)
But let me focus a little more on the importance of the commercial real estate related to the broader economy.

(DESCRIPTION)
Slide. A bar chart is titled C.R.E. Loan Requiring Refinancing, At Higher Interest Rate and Lower Collateral Value. A bar graph displays financial projections in billions of dollars for three consecutive years: 2026, 2027, and 2028. The values shown are approximately $1,150 billion for 2026, $1,250 billion for 2027, and $1,140 billion for 2028. The bars are colored red. Text: Source, S and P Global.

(SPEECH)
This is the number of loans that need to be refinanced. It was taken out a few years ago when interest rates were 3%, 4%. Now, they have to refinance at 6% and 7%. Higher interest rate, can they make the numbers work? Is the rent sufficient to cover this higher interest rate condition?

(DESCRIPTION)
Slide. A line graph is titled Commercial Property Prices, Still Not Recovering. A line graph displays the index value over time from 2000 to 2025. The trend shows an overall increase, with some fluctuations. The index starts around 150, rises to a peak of about 350 in 2022, then declines slightly towards 2025. A significant dip occurs around 2009. Text: Source, Federal Reserve.

(SPEECH)
In addition, the collateral values are much lower. So commercial real estate value has been falling. So now, for refinancing, sometimes, you have to bring additional cash to make up for the decline in the collateral value.

(DESCRIPTION)
Slide. Text: Fed Rate Cuts to Save the Day?  Then, slide. Text: Commercial Market Forecast. Federal Reserve Rate Cuts, Big Help. Job Growth to Turn Around, Boost Demand? Positive Net Absorption, More Leasing. Vacancy Rates Peaking, Easier to Market Property. Supply Picture is Mixed. Temporary Oversupply in Multifamily and Industrial. Permanent Oversupply in Office. Restrained Supply in Retail. Need Lower Rates, More Investment Sales plus Price Growth.

(SPEECH)
But I think on the commercial real estate, just like on the residential, interest rates are very important, especially in the commercial real estate where interest rates are not long-term 30 year. It's typically adjustable rate, three-year term, five-year term. So when the Federal Reserve cuts interest rate, it immediately helps on the commercial real estate.

So Federal Reserve can greatly help. And then you look at certain market, I still see job growth continuing. That will boost demand, positive net absorption. But the big question I would say is only the office sector. So far, we are not getting any indication, even with more job, whether we are going to have more people coming into office or people needing office demand. But lowered interest rate will be clearly an important factor.

(DESCRIPTION)
Slide. Text: Thank you!

(SPEECH)
So I think I have spoken way too much.

(DESCRIPTION)
Lawrence Yun's video feed fills the screen.

(SPEECH)
But thank you for your patience.

(DESCRIPTION)
Joan Woodward's video feed appears on the left, beside Lawrence Yun's.

(SPEECH)
And then, Joan, thank you for allowing me to share some of my thoughts with your audience.

JOAN: Lawrence, I learned so much from your half hour. And I love the pace. I know some people are texting me saying he's going too fast, I can't absorb it. But we'll have a nice conversation now. And please put your questions in the Q&A. But thank you so much. You covered a lot of ground.

The last time you were with us, December 2023, mortgage interest rates were over 7%. Today, they are around 6%, as we said. But we're hoping they come down a bit more this year. What is the mortgage interest rate number that we should be looking for that might start to unlock this market? What would you hope to get to?

LAWRENCE YUN: Psychologically, some people say anything under 6%, even 5.99% would do. But from my experience, looking at the data, it's all about the direction. As long as mortgage rate goes down to 6.2% today to 6.1% next week and 6% later, that's going to help move the market. So it's not a great unlocking, sudden boost of large supply or large demand, but directionally, more housing market activity, more home sales as interest rates decline.

JOAN: OK, OK, so why are prices remaining so stubbornly high for consumers?

LAWRENCE YUN: So we had a housing shortage even before COVID. In fact, 2019, we've been sharing our research data with congressional staff, people at the administration, whoever is in the White House. We constantly mention, there's a housing shortage.

So anytime we have a real estate shortage, housing shortage, prices cannot decline. Now, shortage was exacerbated during the low-interest rate environment, everybody bought a home. But the fact that people bought a home at 3% rate or other homeowners refinanced at 3%.

And did you know that about 40% of homeowners today don't have any mortgage? They own their home free and clear. They're not under distress. So even as the housing demand has weakened, home sellers are not in a distress. And therefore, we are not seeing forced home sales. We are not seeing abundant inventory.

The only exception is, I would say, Florida condominium market. Ever since one of the condominium collapsed several years ago, there's a new legislation that requires large reserve fund for older condominium. And anecdotally, I hear that senior citizen who's living in a condo, they have to write a $30,000 check to fill that reserve fund. They don't have it. So they're saying, I'm going to sell it. So this is the only weakness in the real estate market with price decline, Florida condominium sector.

JOAN: OK, OK, so let's talk about inventory. So what's it going to take to have more inventory on the market, or what are some of the policies or economic incentives that are going to help builders build more housing?

LAWRENCE YUN: Very good question. Because one topic that I wanted to really mention, and in fact, we have Realtors from across the country here in town, Washington, for the next few days. Some will go meet with their members of Congress.

And the No. 1 thing that we will be discussing is lifting of the capital gains tax. So this capital gains exemption from sellable home, $250,000 for a single individual, half a million dollars for a married couple, if they sell it, and it is not within that limit, they don't pay capital gains tax.

However, because of the strong price run-up that we have seen, more and more homeowners are getting ensnared in this capital gains tax. And their accountants are essentially advising, don't sell your home. You should not be paying capital gains tax.

Well, just think about a senior citizen who may be rightsizing with a smaller size home or going to a different location, they're not selling because of the capital gains tax. So they're living in a wrong house. So we want to free that up, lift the capital gains tax.

In fact, that has not been changed for 30 years. Even the price of movie ticket has changed. Price of hamburger has changed. So we're just saying index to inflation. And if it was indexed to inflation, essentially, the new capital gains exemption amount would double the current level. And I think that will really free up more inventory and more buyers looking for the better home than before.

JOAN: Yeah, anecdotally, I definitely have some friends who said that to me, I can't afford to sell because I want to downsize, but I don't want to get hit with that large amount. What are the chances of that actually passing and being signed by the president this year, do you think?

LAWRENCE YUN: Oh, I'm not going to put a percentage on it. But we're constantly talking with members of Congress. I would say our advocacy team at NAR, quite amazing. A few years ago, they thought it was worthwhile to create something called real estate caucus. That is to say, members of Congress who is interested in real estate.

And I think we started out with three members. Well, today, we have 110 and still growing. So aside from specific policy measure, we are getting more people to say, look, this is an American issue. This is your constituent issue. Real estate is important. Let's get together and try to solve this real estate problem to say more home sales, get America moving again. And then clearly, homeownership provides long-term wealth accumulation.

JOAN: OK, this is a hot topic, next topic, which as some have suggested, including the White House, that large institutional investors are the problem here. So would banning large institutional investors from buying single family homes really help with affordability?

LAWRENCE YUN: So institutional investors, in terms of ownership, they would account for maybe 2% of total ownership overall. Is that a lot or not? Does it move the dial? But they're not in every market. They're in few markets. So they're in Atlanta. They're in Jacksonville, Memphis. They're in Dallas. So only few markets.

So if you look at specific market, it could be up to 20%. So it's quite sizable. And we hear from Realtors in Atlanta who say they had a first-time buyer, but they cannot compete with this institutional investor. So we clearly hear that story.

Now, for the home seller, maybe they are quietly selling to the institutional investor because it's a better deal, maybe a little higher price, maybe no mortgage contingency. So home sellers perhaps liking institutional investors.

But the big noise is really coming from the buyer's side. People think that institutional investors are manipulating the market. And furthermore, they're getting special advantage that ordinary homebuyers are not, which is interest deduction.

So they can raise money by borrowing. And then they make all cash purchases. While for ordinary people, they're just getting their mortgages. And they're not able to deduct mortgage interest. Now in theory, it's there. But most Americans currently are not deducting mortgage interest, while institutional investors are fully able to deduct their interest. So we think they have a little advantage. So limiting it, I think, it sort of levels the field a bit.

JOAN: You may not know the answer to this question. I don't know it. Does that take an act of Congress to ban investors from buying single family, or is that an executive order, or we don't know?

LAWRENCE YUN: Well, I think President Trump would like to say it's an executive order. But I think on this topic, President Trump actually did say to Congress, pass some legislation, bring it to my desk. So yeah.

JOAN: OK, let's go to Fannie and Freddie because you talked about them. Some have suggested that them purchasing $200 billion maybe of mortgage-backed securities would help lower mortgage rates. But we have $11 trillion mortgage-backed security market outstanding. Is this going to make a dent? You said earlier it might.

LAWRENCE YUN: So when that announcement came, actually, mortgage rate actually declined by 20 basis points. So to put it for everyday language, mortgage rate was averaging 6.2%. And in a single day, it went to under 6%, 5.99% when that announcement came because market always react from the news rather than the action of it.

So I think what the White House is essentially doing is-- As we know, Federal Reserve and the White House has been constantly in fighting apart. Jay Powell, his term is coming up in May. So President Trump will install his person into the Fed chairmanship.

But in the meantime, they are saying Federal Reserve is not helping. So why don't we utilize Fannie and Freddie to lower the interest rate? So this is where Fannie and Freddie mortgage purchase is happening. So at least on the news, it did have an impact. Now, whether that's sustainable over the long term, we have to wait and see.

JOAN: But you don't need an act of Congress to do that. That is something Fannie and Freddie could do right now. Is that correct?

LAWRENCE YUN: Fannie and Freddie can do on their own. But I think what some people are raising question is, Fannie and Freddie, 15 years ago, they also began to purchase a lot of subprime mortgages to keep it in the portfolio. So when it burst, when it blew up, Fannie and Freddie blew up along with it. Now, fortunately, we don't have those subprime lendings. So what Fannie and Freddie would be purchasing would be much more better-quality mortgages.

JOAN: OK, good, good. All right, another topic. A lot to talk about. A lot of people have suggested, let's go to a 50-year mortgage. Would a 50-year fixed-rate mortgage make a home ownership more affordable? Seems to me, I would just be paying more for my house, just over a longer period of time. Do you think it's a good idea?

LAWRENCE YUN: I got a lot of questions from Realtor members about this. What's my view. And I think the way I answered it is the following. I have a son who is in mid-20s. I mean, his salary is good, but he's not in a hurry to buy a home.

But let's say that he is-- wants to buy, and he cannot qualify for 30-year fixed-rate mortgage, but he qualifies at 50 because of lower monthly payment, not drastically lower, but modestly lower. Would I approve of this? And I say, yeah, why don't you go ahead and get into the 50-year mortgage and start building wealth and use that wealth for the next home purchase.

It is not a 50-year trap. People can always sell their home at any time and get a fresh 30-year fixed-rate mortgage. So it may move the needle small, small amount. It's not a game changer, but it's a positive option.

JOAN: Positive. It's mostly for first-time homebuyers. With the first-time homebuyer age right now, I think it's up to-- is it up to 40? What is the first-time homebuyer age right now?

LAWRENCE YUN: Oh yeah, that is a shockingly high 40. Highest ever, highest median first-time buyer. We typically associate with late 20s, early 30s, buy a home, build wealth. But if you are buying at 40 and you take out a 50-year mortgage knowing that this may be your last home, well, what if someone live until 90 year old to repay.

But again, 50-year mortgage is not a 50-year trap condition. But yeah, this is depressing figure for overall America to say in America, you have to be 40 years old to own a property. I mean, that's not a good message. And maybe the consumer sentiment, low consumer sentiment is partly a reflection of that.

JOAN: Yeah, OK, another hot topic, which is some localities and HOAs are actually working to ban short-term rentals in their communities like Airbnb or Vrbo. So do these short-term rentals impact affordability in certain marketplaces?

LAWRENCE YUN: I would say, all the local communities have different perspective on it. So it's their decision, as long as they're respecting legal condition and all the local rules. But I would say the following, in South Carolina, where they are permitting a lot of short-term rental in certain markets like Myrtle Beach, they thought that maybe this is taking away, so maybe the other rental prices would rise condition.

But what they found is that it didn't really impact the rental rate or housing cost at all, because what was happening was that short-term rental was available, but at the same time, they were building a lot of new construction. So as long as you have new construction coming along the way, it's not withdrawing that inventory out of the market due to short-term rental.

JOAN: OK, very good. Taking more audience questions now for you. Thank you for putting so many in. There's a question on, Realtor.com did a survey recently that found a growing number of Americans who are concerned about whether they can continue to afford homeowners insurance, something we care deeply about. So can you tell us about this survey?

LAWRENCE YUN: So, it's our sister organization. And clearly, what we are seeing is historically, when we look at the affordability, we look at home price, people's income and mortgage rates. So those were three ingredients. But today, the insurance cost has become a big factor in terms of whether people want to go buy a house or not or their capacity, financial capacity to buy. So I think the insurance has become a new factor for overall housing affordability. And with the insurance rate rising, that has definitely been a negative on the overall affordability condition.

JOAN: And actually this year, I'm going to put a little plug for a Travelers program, our CEO really took on the availability and affordability issue after the California wildfires and created a new program at the Institute called Risk. Regulation. Resilience and Responsibility.

And we're actually going across the country. If you get my emails, you'll see. We've been to about six places. We're going to another 15 or so this year, partnering with our agent and broker partners, with regulators, with consumer groups to talk about all the ingredients that go into a strained insurance marketplace, whether it's regulation, the availability is a huge issue in a number of places we're going to.

So watch that for your inboxes. We'll be coming, hopefully to a city where some of my viewers are watching from. So let's talk about what point, Lawrence, in the homebuying process should insurance brokers get involved.

I had a daughter in her late 20s, now 30s talking to me about buying a home. And my first question was call your insurance broker, find out if it's insurable. And I think a lot of people don't do that early in the process. What is your advice?

LAWRENCE YUN: I think they need to look at the whole totality of the housing cost. So I think talking with the mortgage lender, what's available, what's the financial capacity. I think the mortgage lender will immediately say, OK, I need to see some insurance options or conditions. So I think it's a very good idea for consumers to be informed. Talking to insurance broker at the early stage, I think that will be all positive to make the overall homebuying process much smoother.

JOAN: So I have a question coming in from a newer insurance agent. He says I'm working with first-time buyers who are hesitant. What insurance-related considerations should agents be helping them think through? That's a good question.

LAWRENCE YUN: Oh, I mean, this is a business question, marketing question. And I think you are the best in terms of that. But as long as I think-- what consumers, when we take survey about the Realtors, we are finding that about 80% of the recently completed home transaction, the Realtors they work with, they are so satisfied with the service they provided.

I think one can also connect that with the real-- insurance brokers. And the reason why they were so satisfied is the one word, they trust their Realtor. So as long as there's the trust involved and that trust builds over time, definitely never, ever cutting corners, so insurance brokers come up with all the options, option A, option B, like this, I think as one gains the trust, I think this is how one can begin to do more connection with the consumers, grow business over time.

JOAN: All right, let's switch a little bit and talk about climate. Because what have you seen in terms of extreme weather in certain housing markets? We know that people want to live on the coast. They want to live in some of these popular places that have extreme weather events over and over and over again. What are your thoughts there?

LAWRENCE YUN: Well, if it's a same repetitive areas which gets flooded, I think properly, who would insure that property if the insurance company is constantly losing money? So one has to actuarially price that correctly or have a mitigation effect.

Maybe they'll raise the ground floor level. So when there is a flood, it doesn't impact the living quarters and things like this. So as long as there is a mitigation effect that companies can rightly price. Now, as to the extreme weather, sometimes it's not the coastal areas.

It could be a vast portion of the country, as we know, this cold front that whole America will be looking-- I'm actually looking forward to it, but we need to anticipate, in the coming days, all the way from say, South Carolina to the state of Maine, the Midwestern states, this massive snow, massive cold that's coming in.

So I think the weather clearly has become more extreme in that regard. At least this is what the meteorologists are constantly indicating in terms of the storm intensity, the strength. So I think we are in this environment. And we have to price the insurance correctly to correspond to that.

JOAN: OK, I want to talk about the eye-popping numbers in one of your charts there, I think. We have a question coming in on Maine. The values went up by 80% from five years ago. New Hampshire's were up by 70%. What is going on in these states?

LAWRENCE YUN: Oh, well, Maine has terrific lobster to eat. But that's not the reason. The reason is essentially, when the COVID hit, the Northeastern two big cities, Boston and New York City, city residents said "I'm out of here."

And then they found out that they could work remotely with all this Zoom technology. So they were able to work remotely. So they said, look, I want to see the ocean. I want to see the mountains. I want to breathe fresh air. So I think this really contributed.

So over the next five years, is it going to be the case where as people slowly return to office, that Maine loses some of this appeal? Or people have discovered Maine, and they're telling their friends, come over to Maine? So it remains to be seen. But the reason why Vermont, New Hampshire, Maine really took off, I think, is the New York City, Boston COVID impact.

JOAN: OK, switching gears a little bit, I want to talk about commercial real estate. And one of the hot topics today, and in even Davos, I was watching CNBC this morning talking a lot about this, data centers. So how do you see data centers impacting the local real estate markets where they're being built and the cost of energy and pushing up those prices?

We have a little place in Southern Virginia. And this huge data center is going up. But that's a rural area. And there's lots of concern about these data centers, people don't want them in their backyard because it's pushing up energy prices. What is your view on that?

LAWRENCE YUN: Yeah, I'm in Washington, so the Northern Virginia, where there's so much data centers. And one can identify data centers by the following. You are on an airplane flight, you go over and you see some building. But if you don't see a lot of cars around, not too many cars around it, well, that's a data center.

So they are eating up large amount of energy part. So whether it should be done in more rural area or not, even in the Phoenix area, suburb of Phoenix, one would think, wow, data center, they need a lot of water to cool it down and things like this. And Arizona does not have water.

One Realtor told me there, at least according to some academic studies, there's 100 years of water supply in Arizona guaranteed, I guess underground water sources and such. So I don't have a clear answer on that, but it is clearly that artificial intelligence-driven data centers, they need a massive data. Only way to have massive data, they need to store large data. But it requires a lot of energy, a lot of coolants.

And I don't know how it's going to impact real estate overall. Some communities are saying it's a job creator. Others are saying it's a nuisance. So let the companies figure out what the balance is.

JOAN: OK, staying on commercial markets. This person says, you've said in your presentation that you see a permanent oversupply in office space. Can the housing shortage be addressed by turning vacant office buildings into affordable housing? This is a great question. In some larger cities, these vacant-- is it easy to turn them into condos or apartments if they're not going to be used for commercial purposes?

LAWRENCE YUN: One cannot do it-- meaning that private companies cannot do it on their own because too much cost involvement. And the final, say, apartment units or condominium units, which they're going to sell, the numbers will not work. So, the only way it works is through some kind of tax credit incentives part.

So whether or not government, state, local or at the federal level provide some incentive to convert the empty office building into residential units, because trying to build one-- rather than, say, centralized bathroom near the elevator, now one requires the bathroom areas individually. Those are all costly. And only tax credit can make it work.

JOAN: OK, OK, this viewer is asking you, you've been crunching these housing numbers for a long time now. Has anything over the past year in your data surprised you? Good question.

LAWRENCE YUN: I think what surprised me is that, first, the mortgage rate, I thought it would decline somewhat last year. And in the first half of the year, no movement at all. Only in the second half, we began to see a little decline.

And the third part is how resistant that 3% mortgage rate lock-in effect is. So consumers, they love their 3% mortgage rate, never going to give up. But only in the past six months or so, we began to see a little loosening. And I think that is just coming from the fact that people who said they will never give up their 3% mortgage rate, they were sincere in their expression.

However, things happen in life. They have additional child in the family; they need a larger size home. Maybe there's a death in the family, divorces, other life-changing events, new job at different location. So now we are seeing more people actually give up their 3% and get the market interest rate for their next home purchase.

JOAN: OK, folks, we have over several hundred questions coming in. I'm trying to go really fast here. Next one, a non-economic question. What trends are Realtors seeing in what buyers are looking for in today's homes? So bigger or smaller? Is the kitchen still the biggest draw? Should they remodel that old bathroom? Open floor plan still the thing? Smart homes, efficiency? What is the newest trends, or what is the smartest investment you could do?

LAWRENCE YUN: Certainly, the builders are trying to adjust to the latest consumer tastes, but the builders are only able to build in the outer suburbs. They cannot do the infill, more closer to the city center. So you may require more remodeling. But definitely things like marble countertops are important, modern appliances, clearly important, open spaces.

But related to the energy efficiency, what we are finding is that people are making that decision from a financial angle. Now, some people would naturally have more philosophical view to say, I want to be green, I want to-- but actual decision appears to be more financial.

If one can demonstrate that will actually save money over the long run by installing certain green feature, then they actually go with the green feature. But if you just say, don't be bad person, be a good person, get a green feature, well, they don't buy that. So people need that financial numbers to make it work.

JOAN: OK, very good. This is a great question. How should property owners and insurance professionals think about the growing emphasis from insurance carriers on smart home safety devices, newer roof requirements, inspections, underwriting audits, and how might these trends influence valuations in insurability and loss outcomes? Great question.

LAWRENCE YUN: Yeah, I think more data. I think one can differentiate a little more risk, characterize the risk a little better. Just consider how insurance company began a long, long time ago, 300 years ago. The Dutch debt, Spanish debt or the English debt. That's the only thing you go by.

And some people say, well, Spain, they never repaid the money, borrowed money. So we have to charge higher interest rate because of that risk. But now, the ability, even artificial intelligence to say, OK, some roof tiling is beginning to peel off, what does that raise the risk factor?

So now one can suddenly change the premiums on the renewal part, lowering, higher. So now with the more information, more data point, I think one can see much differentiated insurance rate to account for all this new adoption on micro factors.

JOAN: Another really good question coming in about first-time homebuyers unable to buy it because there's all these people coming in with cash, all-cash offers. How does a young couple or a single person just starting out compete with someone who's bidding maybe multiple offers, an all-cash basis. And is there anything-- I remember back in the stimulus bill, in Obama in 2009, it might have been, they had a $10,000 tax credit for first-time homebuyers. You could see that coming back at all?

LAWRENCE YUN: So some government-owned property, which means essentially it was a foreclosure, FHA took it back, they would first allow a 90-day window for first-time buyer before institutional investors can make a bid on it. So that could make some options. But those are limited inventory.

I think one has to, especially related to that very specific question, first, there's a question about institutional investors. But then there are other normal cash buyers. How do you compete? Well, you have to compete in terms of, say, less requesting on home inspection, or say, modification, and giving huge flexibility on the closing date.

Sometimes, the seller wants to have that flexibility to move in three months or four months, rather than in one month. So providing those options, the first-time buyer who are coming with mortgages would have a little better chance.

JOAN: I think that's great advice. Don't focus so much on the price or all cash, but be flexible on some of the other things. So Lawrence, our hour has flown by. Thank you so much for coming. Thank you so much for being so high energy. And thank you for what you do. We're all grateful that you're steering the 1.5 million real estate agents out there in a very thoughtful way. So we really appreciate your time.

LAWRENCE YUN: I enjoyed it. Thank you.

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