The housing industry is on the verge of a turnaround, according to Lawrence Yun, the chief economist for the National Association of Realtors (NAR). But don’t expect interest rates to fall back to 4% anytime soon.

Speaking at the NAR’s Residential Economic Issues and Trends Forum in Boston Friday, Yun said that after an “awful” 2023 and a difficult 2024, housing inventory is improving, mortgage rates are stabilizing, and job growth is continuing. He also pointed out that household equity in real estate is at record levels.

“Maybe the worst is coming to an end,” Yun said of the home sales. “Directionally, I think there’s going to be roughly a 10% boost of existing home sales in 2025 and 2026.”

He expects new home sales to grow by 11% next year and 8% in 2026. He also forecasted that median home prices will rise by 2% in each of the next two years.

As for interest rates, Yun predicts six to eight more interest rate cuts before the end of 2025, but he does not see interest rates falling to the 4%-range the industry enjoyed during President-elect Donald Trump’s first term.

“Mortgage rates in his first term were the good old days,” he said. “Are we going to go back to 4%? Per my forecast, unfortunately, we will not. It’s more likely that we’ll go back to 6%. That will be the new normal, bouncing around 5.5% to 6.5%.”

One reason for the higher interest rates is the cost of borrowing to service budget deficits and increased government spending. Yun expects that borrowing to continue during the incoming Trump administration.

“Today, we have a massive budget deficit at a time when we are not in an economic recession,” he explained. “Clearly President-elect Trump will not stop tax cuts, he will extend or expand them. There will be less mortgage money available because the government is borrowing so much money. However, if the Trump administration can lay out a credible plan to reduce the budget deficit, then mortgage rates can move downward.”